Here’s Why Red Hat Inc (RHT) Shares Have Popped to Another Record

Red Hat's F2Q18 results significantly beat on revenue, margin and EPS.


Shares of Red Hat Inc (NYSE:RHT) hit a new 52-week high after hours Monday, after the software maker reported excellent 2Q:FY18 results and served up a stronger than expected 3Q:FY18 sales outlook, combined with raised guidance for FY:18.

Specifically, the company reported total revenue of $723 million, beating consensus estimates of $700 million and management’s outlook of $695-702 million. The upside was driven by subscription sales that came in at $638 million, compared to consensus of $618 million. Margin and EPS of 26.4% and $0.77, respectively, were ahead of consensus’ 23.9% and $0.67 estimates.

Looking ahead, management raised its revenue forecast for FY18 to $2.880-2.895 billion, compared to prior forecast of $2.785-2.825 billion and consensus estimate of $2.812 billion. The EPS outlook was raised as well, coming in at $2.77-2.79, above the prior guidance of $2.66-2.70 and consensus of $2.69. Notably, management raised its full-year operating cash flow forecast to $880-900 million from prior outlook of $850-870 million. For F3Q18, the outlook calls for revenue and EPS of $730-737 million and ~$0.70, versus consensus estimates of $711 million and $0.70, respectively.

On the ratings front, RHT has been the subject of a number of recent research reports. In a report released today, Drexel Hamilton analyst Brian White assigned a Buy rating on RHT, with a price target of $127, which represents a potential upside of 20% from where the stock is currently trading. On September 22, Cowen’s Gregg Moskowitz reiterated a Buy rating on the stock and has a price target of $112.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Brian White and Gregg Moskowitz have a yearly average return of 10% and 9.7% respectively. White has a success rate of 62% and is ranked #258 out of 4653 analysts, while Moskowitz has a success rate of 66% and is ranked #402.

Sentiment on the street is mostly bullish on RHT stock. Out of 16 analysts who cover the stock, 11 suggest a Buy rating and 5 recommend to Hold the stock. The 12-month average price target assigned to the stock is $110.64, which represents a slight upside potential from current levels.

Red Hat, Inc. engages in the provision of open source software solutions. The firm operates its business through the following graphical segments: Americas (the United States, Canada, and Latin America); EMEA (Europe, Middle East, and Africa); and Asia Pacific. It offers Red Hat Enterprise Linux; Red Hat JBoss Middleware; Red Hat Enterprise Virtualization; and Red Hat Storage Server.