Red Hat (RHT): Reit Buy On Strong Billings Growth - Needham

September 22, 2016 6:47 AM EDT
Get Alerts RHT Hot Sheet
Price: $80.16 -0.5%

Rating Summary:
    26 Buy, 10 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 15 | Down: 23 | New: 57
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Needham & Company analyst Scott Zeller reiterated its Buy rating on shares of Red Hat (NYSE: RHT) after the company posted quarterly results showing accelerating billings growth while the broader software community confronts IT spending headwinds.

The analyst highlighted the $1m+ deal count of 55 deals, +60% y/y, demonstrating the power of Linux upsell as it displaces UNIX and as big banks adopt Cloud Infrastructure. Billings performance of +20% y/y is the best growth rate in 18 months, and is RHT's most closely watched metric. When looking at “core” vs. “new” products, the RHEL Infrastructure group did better than expected at +18%; we note the “cloud” business (CSP, etc) is reported as part of “core” and likely supports growth.

Estimates increased for FY17, but there is no change to FY18. No change to the price target of $98 which equates to 6x EV/FY18 revenue and 23x FY17 EV/FCF.Shutterfly (NASDAQ: SFLY)



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