Oppenheimer Maintains an Outperform Rating on Red Hat

By George MacDonald

In a report issued on March 22, Ittai Kidron from Oppenheimer maintained an Outperform rating on Red Hat (NYSE: RHT), with a price target of $88. The company’s shares closed yesterday at $72.54.

Kidron observed, “Red Hat reported solid results ahead of consensus and offered strong FY1Q17 and FY17 guidance. The company appears to see little impact from macroeconomic headwinds (except for FX), posting strong growth across all geographies. While full- year bookings growth below revenue growth is something to watch, it’s not uncommon (4/5 last years) and growth in cloud revenue could drive further divergence making the comparison less relevant long term. Overall, we’re encouraged by the strength and by the new solution cross-selling metrics, with a record 83% of deals including AD&E solutions. With newer solutions seeing solid traction and traditional RHEL yet to see a meaningful negative impact from cloud, we see further upside as investments in new solutions moderate later in FY2H17/FY18.”

Currently, the analyst consensus on Red Hat is Strong Buy and the average price target is $89.75, representing a 23.7% upside. In a report issued on March 14, Deutsche Bank also maintained a Buy rating on the stock with a $95 price target.

Based on Red Hat`s latest earnings report from November 30, the company posted quarterly revenue of $523.6M and quarterly net profit of $46.85M. In comparison, last year the company earned revenue of $463.9M and had a net profit of $47.7M.

Unlike Oppenheimer`s latest rating, based on the recent corporate insider activity of 82 insiders, corporate insider sentiment is negative on the stock. Most recently, in January 2016, William S. Kaiser, a a Director at RHT sold 18,972 shares for a total of $1,520,606.

According to TipRanks.com, Kidron is ranked 0 out of 5 stars with an average return of -3.2% and a 43.7% success rate. Kidron covers the Technology sector, focusing on stocks such as Advanced Micro Devices, Riverbed Technology, and Motorola Solutions.

Red Hat Inc is a provider of open source software solutions, using a community-powered approach to develop and offer reliable and high-performing operating system, middleware, virtualization, storage and cloud technologies.