A Tip Of The Cap To Red Hat's Strong Quarter: Sell-Side Roundup

Red Hat Inc RHT reported
first-quarter non-GAAP net income of $0.56 Tuesday after the market close.

The figures came in $0.06 higher than the $0.50 per share in the year-ago period, and the top line grew 19 percent to $677 million. Both metrics were ahead of the consensus estimates.

The company raised its full year earnings per share and revenue guidance. In reaction to the results, Red Hat shares are surging up over 10 percent.

Here is the sell-side round up on the financial results of Red Hat.

BTIG: Maintains Buy, Raised Price Target To $120

BTIG analysts Joel Fishbein and Edward Parker believe the fiscal first quarter may prove to be a landmark quarter for Red Hat, bringing a strong validation to oft-cited claims that it is becoming an increasingly important strategic partner to enterprises trying to modernize their tech infrastructure.

BTIG is of the view that the company can maintain double-digit revenue, operating income and earnings per share growth over the next few years, given the pickup in momentum with big customers.

The firm termed the deal metrics as stellar, with strong cross selling seen. Additionally, the firm thinks increasing contribution from non-core solutions would drive higher deal value in the future.

BTIG maintains its Buy rating on the shares of Red Hat and increased its price target from $95 to $120.

Deutsche Bank: Buy Reaffirmed, PT Raised By $10

Deutsche Bank noted that Red Hat followed a surprisingly strong fourth quarter with another big quarter, with strong billings growth being the highlight. Helped by better linearity and faster raps, the firm noted that revenues topped expectations.

Analyst Karl Keirstead attributed the strong billings growth to broader demand lift, with more F500 companies preparing for a workload mix shift to Amazon.com, Inc. AMZN's AWS, Microsoft Corporation MSFT's Azure and other public clouds. This, according to the analyst, is accomplished by making their internal infrastructure and apps look more AWS-like, easing the migration burden.

According to Deutsche Bank, the only negatives were the fact that the company refrained from raising its 2018 operating cash flow guidance and that some one-timers contributed to the billings beat.

Deutsche Bank reaffirmed its Buy rating on the shares of Red Hat and it raised its price target from $100 to $110.

BMO: Staying At Market Perform, Raised Price Target To $107

BMO Capital Markets sees the results as signaling continuation of Red Hat's recent momentum with both subscription and billings growth of 20 percent year over year at constant currency.

Analyst Keith Bachman believes the strength in App dev & emerging tech is helping the company to win larger deals, with the company winning 44 deals greater than $1 million in the first quarter.

"We think a broader portfolio of hybrid technologies, including storage, OpenStack, and OpenShift will continue to drive large deal size wins, and thus drive improved revenue growth vs. our previous forecast," the analyst said.

BMO Capital Markets, however, thinks the company's cash flow guidance is conservative.

The firm raised its estimates for the company and lifted its price target from $90 to $107, while it remained at Market Perform.

Oppenheimer: Outperform Reiterated, $9 Price Target Boost

Oppenheimer believes the strong May quarter results and the better-than-expected guidance reflected good large deal momentum and broad-based support across regions and its product portfolio. Analysts Ittai Kidron, Michael Leonard and George Iwanyc see this as positive sign, as Red Hat successfully and sustainably diversifies its revenue base beyond RHEL.

"The solid customer/large deal traction also reinforces our belief that Red Hat's in a strong position to become a critical partner in cloud environments," the analysts said.

Oppenheimer reiterated its Outperform rating on the shares of Red Hat and raised its price target on the shares from $96 to $105.

At the time of writing, Red Hat shares were rallying 10.12 percent at $99.06.

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