Red Hat Rebounds With 'Strongest Quarter In Years'

Red Hat Inc RHT just delivered one of its "strongest quarters in years," according to Street Insider.

Earlier in Tuesday's session, shares of the software provider were up over 6 percent following solid year-end results, rebounding from a disappointing third quarter.

Deutsche Bank has reaffirmed its Buy rating following the fourth quarter release, and raised its price target from $90 to $100. The German bank also raised its EPS estimate from $2.51 to $2.63 and also raised its revenue target to $2.75B up from $2.66B.

Constant currency billing growth came in at 29 percent, well above the company's guidance. Red Hat earnings came in line, but beat consensus sales estimates by $10 million. The company also crossed $2 billion in annual subscription revenue for the first time.

Commentary

Management cited good execution and an upbeat overall spending backdrop as reasons for the positive results. The company shares are now nearing highs not seen since 2015. Analysts are also noting a lack of evidence that Amazon.com, Inc. AMZN Web Services/Cloud is negatively affecting the company.

Deutsche Bank believes Red Hat is still undervalued and that investors will view current FY 2018 FCF multiple of 17x as being too low. A large number of big deal wins also drove the impressive quarter, including two government deals and a $10 0million telecom deal.

“RHT shares look attractive given the mid-tens growth profile, an improved macro backdrop and strong big deal signings over the last few quarters,” said Deutsche Bank on Tuesday.

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