Red Hat Inc. (NYSE: RHT) is set to release its fiscal first-quarter financial results after the markets close on Tuesday. Consensus estimates from Thomson Reuters call for $0.50 in earnings per share (EPS) on $562.76 million in revenue. In the same period of last year, it posted EPS of $0.44 and $481 million in revenue.
Despite a high-beta valuation, Pacific Crest believes that Red Hat’s core business remains very strong to support its valuation of roughly 36 times expected earnings. The company is also seen generating high levels of free cash flow ahead. This company is still growing earnings and revenues in the double-digit percentages.
While many on Wall Street acknowledge that Red Hat trades at a relatively high valuation compared to forward earnings estimates, they also think that Red Hat is well positioned to benefit from market share gains of the “open source” Linux operating system over time.
This company is the world’s leading provider of open source software solutions, using a community-powered approach to reliable and high-performing cloud, Linux, middleware, storage and virtualization technologies. Red Hat also offers award-winning support, training and consulting services.
A few analysts weighed in on Red Hat prior to the release of the earnings report:
- Drexel Hamilton reiterated a Buy rating with a $105 price target.
- Deutsche Bank reiterated a Buy rating.
- Barclays reiterated an Overweight rating with a $90 price target.
- RBC Capital reiterated a Buy rating.
- Oppenheimer reiterated a Buy rating with an $88 price target.
- Pacific Crest has an Overweight rating with an $88 price target.
So far in 2016, Red Hat has underperformed the broad markets, with the stock down nearly 3%. Over the past 52 weeks, the stock is actually up just over 1%.
Shares of Red Hat were trading up 0.7% at $80.98 on Wednesday, with a consensus analyst price target of $88.97 and a 52-week trading range of $59.59 to $84.44.