Raymond James Reiterates Market Perform Rating on Red Hat Following F2Q Billings Miss

In a report published Tuesday, Raymond James analyst Michael Turits reiterated a Market Perform rating on Red Hat RHT. In the report, Raymond James noted, “We reiterate our Market Perform rating on RHT following a F2Q that slightly beat revenue and EPS but fell well short of the billings consensus. Of the $22 million billings miss, we estimate $4 million went to off balance sheet backlog that typically would have been billed. However Europe seems to have driven the miss, with US federal and services also still weak. With billings growing just 10% constant currency (CC) even adjusting for the $4 million, there is a clear slowing relative to last year's 21% adjusted gain. Outside of macro issues, we remain concerned that this owes to slowing in core Linux. We continue to view Red Hat's business as highly strategic, but question whether the growth of its emerging storage, server virtualization and cloud management/OpenStack businesses can offset the eventual maturation of core Linux sales in the next 12-18 months. We are lowering our F14E revenues in line with guidance owing to forex with EPS going up slightly on the F2Q beat. However we are lowering our F14E billings growth forecast to 11% from 14% on the third straight quarterly miss.” Red Hat closed on Monday at $52.93.