Shares in Red Hat haven’t been this hot since the go-go days of the “dot com” boom when the company went public and its shares soared to $105. On Thursday, shares soared 11 percent to a new 52-week high of $76.70 after a strong earnings report on Wednesday. The company closed the day up almost 7 percent, at $75.36 per share.
And Wall Street analysts are impressed, some of whom noted that Red Hat drove up revenues beyond expectations despite a strong dollar or what’s called “currency headwinds.”
Investors jumped on Red Hat shares, too. In very heavy trading, more than 10 million shares traded hands on Thursday.
Steve Ashley, an analyst for Robert W. Baird & Co., praised the Hatters in a report published Thursday, noting the company’s ability to expand beyond its core Linux open source products to support emerging markets such as “cloud computing.”.
“Pace of core infrastructure business (86%) accelerated a bit to 17% year-over-year in constant currency, while new products continued to show increasing traction,” he wrote, according to Investor’s Business Daily. “Red Hat is successfully evolving from a tactical vendor of a single (powerful) product (Red Hat Enterprise Linux) to a strategic vendor of next-generation open source solutions, OpenStack (on premise Infrastructure-as-a-Service) and OpenShift (on premise Platform-as-a-Service).”
Here are some other highlights:
- Brian White, Cantor Fitzgerald (who rates RHT a Buy; $85 price target for shares):
Last night, Red Hat overcame a significant FX headwind to beat our 4Q:FY15 estimates and the Street, while the company offered up a solid outlook for both FY:16 and 1Q:FY16. Furthermore, Red Hat announced a new $500 million stock repurchase program.
In our view, last night’s performance demonstrates that Red Hat is operating on all cylinders as RHEL continues to show momentum, while younger product areas are gaining traction in the market and the open source movement marches forward.
We are adjusting our estimates and raising our price target to $85.00 (from $81.00) on FX impact.
(White was cited by The Street.com)
Other firms as cited by financial news site Benzinga:
- Jefferies (Rates RHT as a “Hold,” $66 price target):
“F4Q numbers easily exceeded modest expectations even before accounting for increased FX headwinds since guidance was given. Most impressive was solid growth in new business of about 11 percent against a very difficult compare a year ago. Cash flow was also solid and while increased DSOs may cause some concerns, we believe it was more likely due to the strong momentum in the period. The outsized increase in receivables should also be supportive of F1Q cash flow.”
- RBC Capital Markets (Rates RHT as “Outperform,” $80 price target):
“Results in the quarter continued to be broad-based led by double-digit growth in all geographies despite FX and strong cross-selling with a record 80 percent of top-30 deals containing components outside of RHEL. In addition, 13 of the top-30 had five or more products, as sign that Red Hat continues to gain share as a trusted enterprise partner. Revenue out performance and better-than-expected margins led to CFO upside growing 18 percent vs. the most difficult comp of the year at 35 percent.”
- Morgan Stanley (Rates RHT as “Overweight,” $80 price target):
“Despite a ~$100M YoY FX headwind, Red Hat introduced FY16 guidance of $1,990-2,020 which was in line with consensus of $2019M. This implies ~11-12 percent growth on a reported basis but 19 percent YoY growth in cc. compared to 19 percent cc growth in FY15. FY16 EPS of $1.79-1.82 was in line with our $1.80 estimate but below consensus of $1.84, reflecting higher sustained investments in sales and in R&D which keeps OM guidance flat versus FY15. The combination of continued investments, shifts to public cloud and higher cash taxes resulted in operating cash flow guidance of $670-690M — below our original estimate of $705M.
“Against the back drop of 21 percent FY15 cc billings growth, 26 percent FY15 bookings (billing plus backlog) growth and a strengthening core RHEL business; however, we think initial guidance for revenue and cash flow guidance will likely prove conservative.”
Read more at: http://finance.yahoo.com/news/street-saying-red-hat-141351021.html