Why Citrix Systems Is Ready to Rebound

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Citrix Systems (NASDAQ: CTXS  ) bounced back 2% this morning after Nomura Securities upgraded the cloud computing company from neutral to buy.

So what: Along with the upgrade, analyst Rick Sherlund planted a price target of $70 on the stock, representing about 31% worth of upside to yesterday's close. While momentum traders might be turned off by yesterday's earnings-related drop, Sherlund believes Citrix's risk/reward trade-off is now too cheap to pass up.

Now what: Nomura expects Citrix to post 2014 and 2015 earnings per share of $2.87 and $3.18, respectively. "Overall company revenue growth of 8% is coming largely from lower gross margin NetScaler, so the mix shift is creating some near-term margin pressure," Sherlund noted. "We think the low valuation provides some downside protection and there are a number of things that could go right that are not likely reflected in the share price." With Citrix shares off about 30% from their 52-week highs and trading at roughly four times recurring maintenance and subscription revenue, it's tough to disagree with Nomura's bullishness.

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