Oppenheimer Reiterates Buy as Red Hat (RHT) Reports Solid 2Q Results
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Oppenheimer reiterated an Outperform rating and $88.00 price target on Red Hat (NYSE: RHT) following the company's 2Q earnings report. RHT reported revenues of $599.8M and EPS of $0.55 versus the Street's $590.0M and $0.54 estimates. While near-term margins are likely to remain pressured by AD&E investment, Oppenheimer believes that moderating investment and cross-selling could drive upside longer term.
Analyst Ittai Kidron commented, "Red Hat reported solid results with strong revenue driving a $0.01 EPS beat. Most surprising was that the revenue beat was driven primarily by infrastructure-related revenue (RHEL), discrediting fears about limited market growth and public cloud cannibalization. Overall, we come away incrementally positive as the quarter pointed to continued expansion at existing customers (record $1M+ deals) and we are reassured that RHEL remains a solid growth driver. While the loss of two top 25 deals is disappointing, it also makes the overall revenue beat all the more positive, illustrating the strong growth across the business. Margins are likely to remain under pressure in FY2H17, yet we see upside possible in FY18 as investments in new solutions moderate. Tweaking estimates. Maintain Outperform."
Shares of Red Hat closed at $77.04 yesterday.
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