Note: The Skinny blog is written by Rick Smith, editor and co-founder of WRAL Tech Wire and business editor of

RALEIGH, N.C. – Red Hat (NYSE: RHT) is expected to report earnings of 16 cents per share on Wednesday for the quarter ending May 31. And some Wall Street followers as well as investors are expecting good news.

If Red Hat is to become a billion-dollar-a-year company for the first time, this quarter could verify that. Analysts are expecting $253.6 million in revenues.

Analysts firm Piper Jaffray raised its stock target price for Red Hat to $57 while maintaining its “overweight” rating, according to a research note cited by the website Benzinga.

“We conducted a global survey of 42 Red Hat partners and found that they finished 1.5% above plan for Q1, precisely consistent with their Q4 performance,” the note said, according to Benzinga. “Partners continue to detect a better pace of business and faster pace of Unix-to-Linux migrations. We observe Red Hat’s business benefiting from its positioning at the confluence of several hot segments: open source software, Cloud, and Virtualization. We believe this ensures Red Hat will benefit as companies modernize their data centers and prepare their infrastructure for Cloud Computing, driving ongoing market share gains in 2011. Overweight, $57 target.”

Red Hat shares rallied Tuesday more than 3 percent to close at $43.75. The high for the day was $43.89. Its 52-week high is $49, reached last December. Shares traded as high as $47.71 in April. The low is $28.20.

Tuesday’s closing price was the highest since $44.03 on May 23.

The options front showed more enthusiasm for Red Hat with buyers looking at $45 with the trading at the highest level in two months, according to Pipeline Trading Systems.

The call options won’t pay off unless the earnings report boosts the stock price, notes The Wall Street Journal. The call option is not an obligation to buy shares.

“With an average price of 80 cents, these new option owners will need Red Hat to trade at least 9.4% higher over the next four weeks to begin to see any profits,” The Journal quoted Patrick Mortimer, director of options trading at stock and options block execution firm Pipeline Trading Systems as saying.

Analysts following Red Hat are overwhelmingly positive about the Hatters with 11 rating the stock as a “strong buy” and five as a “buy.” Four rate Red Hat as a “hold,” and two say investors should “sell.” 

Read more from The Journal here.

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