What The Street Is Saying About Red Hat

Red Hat Inc RHT reported Q4 earnings Wednesday and beat expectations.

The company reported non-GAAP EPS of $0.43 on total revenue of $464 million, beating the consensus numbers of $0.41 and $457 million, respectively.

The stock surged following the news and traded at $72.50 in Thursday's pre-market, up 5.92 percent.

Analysts commented on the results. Below are highlights along with current ratings and price targets.

Jefferies - 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."

Cantor Fitzgerald - Buy, $85 price target

"In our view, the tone of Red Hat's call last night was very positive, highlighted the momentum of RHEL and younger product areas. For example, for the first time ever, all of the top 30 deals were over $2 million. In our view, Red Hat is morphing from a one-product company into a multi-product company as the open source movement gains momentum. Today, there is a massive re-tooling of the technology infrastructure at enterprises around the world, while Red Hat's standing as a leading provider of open source software solutions positions the company well for the build out of next generation data centers and new opportunities across the cloud computing landscape with a focus on the open hybrid cloud, in our view. As such, we believe that FY:16 is preparing to be a great year for Red Hat as the company has never been better positioned, with all of its major products refreshed and the trend towards open source platform."

RBC Capital Markets - 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 outperformance 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 - 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."