Red Hat And Other Software Stocks That May Beat Revenue Estimates (RHT)
Analysts at Lazard believe software makers Citrix Systems (NASDAQ: CTXS), NetSuite (NYSE: N) and Red Hat (NYSE: RHT) are well positioned to benefit from strong government spending in the current quarter and possibly to the end of the year.
That should help them exceed consensus revenue estimates in the third quarter.
Below we take a look at how these three stocks have fared and what analysts expect from them.
Note that Lazard also recommended CommVault Systems (NASDAQ: CVLT), Service Source International (NASDAQ: SREV) and Synchronoss Technologies (NASDAQ: SNCR) in its research report for the same reasons.
This Fort Lauderdale, Florida-based business software company sports a market capitalization of more than $13 billion. Like the others featured here, it does not offer a dividend. The long-term earnings per share (EPS) growth forecast for Citrix Systems is more than 13 percent.
The short interest in this provider of cloud computing solutions for information technology and service providers was less than two percent of the float as of the July 31 settlement date. That was lowest number of shares sold short since the end of May, and down by more than a third from the year-to-date peak early in the year.
Of the 37 analysts surveyed by Thomson/First Call, 25 recommend buying shares, with 11 of those rating the stock at Strong Buy. Their mean price target, or where the analysts think the share price will go, is about seven percent higher than the current share price. However, that target is less than the 52-week high.
The share price is up more than eight percent in the past month, but it is still more than seven percent lower than a year ago. Since the beginning of the year, the stock has underperformed the likes of Cisco Systems (NASDAQ: CSCO) and VMWare (NYSE: VMW), as well as the broader markets.
This maker of cloud-based financial and enterprise software has a market cap of about $7 billion. NetSuite also has a long-term EPS growth forecast of about 29 percent, but note that its return on equity and its operating margin are both in negative territory.
The short interest in this San Mateo, California-based company was more than five percent of the total float at the end of July. That was the smallest number of shares sold short since last February. The days to cover fell from about eight to about four during the period.
The consensus recommendation of the analysts is to hold shares, and it has been for at least three months. So, not much of a surprise that the current share price near $96 is higher than the analysts' consensus price target. Note that the range of price targets is quite wide: $50 to $115.
The share price reached a multiyear high earlier this month and has retreated about five percent since then. It is still up about 37 percent since the beginning of the year. Over the past six months, the stock has outperformed competitors such as Salesforce.com (NYSE: CRM), and the Nasdaq and the S&P 500.
This provider of open source software solutions to enterprise customers is headquartered in Raleigh, North Carolina, and it has a market cap of less than $10 billion. The long-term EPS growth forecast is more than 16 percent, and the return on equity is more than 10 percent.
The number of shares sold short as of the most recent settlement date represented more than two percent of the total float, after dropping more than 17 percent from the previous period. That was the lowest short interest since March, and the days to cover declined to less than four.
Of the 33 analysts surveyed, six rate the stock at Strong Buy and 13 others also recommend buying Red Hat shares. The analysts' mean price target indicates that they see more than 10 percent upside potential. Note that the consensus target is less than the 52-week high from last fall.
The share price is more than four percent higher than a month ago, despite a pullback in the past several days. Red Hat has outperformed competitors Oracle (NYSE: ORCL) and SAP (NYSE: SAP) over the past six months, but it has underperformed the broader markets.
See also: Small-Cap Tech ETF Merits Consideration
At the time of this writing, the author had no position in the mentioned equities.
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