UPDATE: BMO Capital Markets Downgrades Red Hat to Market Perform, Reiterates $54 PT Following Linux Foundation User Event

In a report published Monday, BMO Capital Markets analyst Karl Keirstead downgraded the rating on Red Hat RHT from Outperform to Market Perform, but reiterated the $54.00 price target. In the report, Keirstead noted, “Last week we attended a Linux Foundation user event in NYC and hosted a call with the CIO of HubSpot, an early adopter of OpenStack. Our checks were a little more cautious than expected about the growth of the Linux OS market, adding to our concern that the underlying server market remains sluggish and that Microsoft's rival Windows Server business may be posting just low-single-digit growth. While the popularity of Linux-heavy cloud infrastructures such as AWS and now OpenStack are net positives for Red Hat over the long term, we conclude that OpenStack is still very early in its development and that many of the early adopters will, as they already do in AWS, use free Linux OS distributions from rival vendors, minimizing the revenue lift to Red Hat from public cloud adoption. Finally, at a macro level, we're not picking up any clear signs that overall enterprise IT spending has recovered so far in 2Q13.” Red Hat closed on Friday at $54.99.