UBS is out downgrading Citrix Systems (NASDAQ:CTXS) to Sell from Neutral while lowering tgt to $22.50.

According to the firm the downgrade comes for the following reasons: 1) Macro to continue to impact near-term performance; 2) They think competitive pressures will limit the company’s ability to expand margins; 3) 2010 EPS estimates present a downside risk; and 4) Shares trade at a premium to the peer group.

Competitive pressures to limit Citrix’s ability to expand margins: Firm says they do not see material upside to consensus 2009 & 2010 operating margin expectations, which they estimate to be 23.8% & 24.6%, respectively. VMware has outspent Citrix on R&D cumulatively since 2000 and on an annual basis since 2006. As such, Citrix will need to invest aggressively in virtualization to improve its positioning in the space, which will likely limit its ability to expand margins significantly in the near term.

Downside risk to 2Q09 estimates Citrix will report 1Q09 results on April 29. They expect the company to report inline results but guide to lower than normal seasonality for 2Q09. Given that the company’s total revenues increased by 6% on average during the last 2 years, the firm believes the management team could guide to a sequential rise of 3-5% for 2Q09 revenues, which compares with current consensus expectations of a 6% q/q rise in 2Q09. They expect management to reiterate full year 2009 guidance of flat revenues and operating margin expansion of up to 100bps.

Notablecalls: Looks like UBS took a look at Vmware's (VMW) results and decided to act quickly and downgrade Citrix (CTXS) to Sell.

Somewhat similar businesses (VMW is sexier, CTXS on the other hand is more stable), high valuations...CTXS could easily suffer VMW's fate.

Probably goes below $25 before it finds any real buyers.