Red Hat: A Strong Buy - Analyst Blog

By
A A A

On Dec 28, 2013, Zacks Investment Research upgraded Red Hat Inc. ( RHT ) to a Zacks Rank #1 (Strong Buy). Long-term expected earnings growth rate of 19.1%, impressive third-quarter results and a positive estimate revision trend makes Red Hat an attractive investment opportunity.

Why the Upgrade?

Red Hat reported strong third-quarter results, beating the Zacks Consensus Estimate on both lines. Earnings jumped 44.8% from the year-ago quarter to 42 cents per share. Revenues increased 15.4% year over year to $396.5 million and were ahead of management's guided range of $381.0 million to $384.0 million.

For the fourth quarter of fiscal 2014, Red Hat expects revenues in the range of $397.0 million to $400.0 million. Management expects operating margin to be around 24.5%. Non-GAAP earnings are expected to be in the range of 36 cents to 38 cents per share for the upcoming quarter.

We believe that strong billings growth (up 19.0% year over year), solid product pipeline, continuing investments to expand product portfolio and partnerships will drive growth. Moreover, Red Hat continues to gain market share. We believe that the company has significant growth potential in the public cloud segment over the long term.

Estimate Revision

The Zacks Consensus Estimate for fiscal 2014 increased 5.2% (5 cents) to $1.01 per share as most of the estimates were revised higher over the last 30 days. For fiscal 2015, the Zacks Consensus Estimate increased 1.2% (2 cents) to $1.15 per share over the same time frame.

Other Stocks to Consider:

Other players in the technology industry, which look attractive at the current levels, include American Software Inc. ( AMSWA ) , Interactive Intelligence Group ( ININ ) and MicroStrategy Inc. ( MSTR ) . All these stocks carry the same Zacks Rank as Red Hat.



AMER SOFTWARE A (AMSWA): Get Free Report

INTERACT INTELL (ININ): Free Stock Analysis Report

MICROSTRATEGY (MSTR): Free Stock Analysis Report

RED HAT INC (RHT): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AMSWA , ININ , MSTR , RHT

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

Most Active by Volume

88,066,694
  • $97.19 ▲ 2.61%
58,241,731
  • $71.29 ▲ 2.92%
51,058,864
  • $44.87 ▲ 0.09%
48,927,829
  • $28.75 ▲ 0.81%
46,551,917
    $15.52 unch
40,249,498
  • $3.46 ▼ 0.57%
38,633,031
  • $22.43 ▼ 9.63%
38,240,825
  • $34.71 ▲ 3.30%
As of 7/23/2014, 04:04 PM