Red Hat Inc (NYSE:RHT): Strong Price Momentum But will It Sustain?

[The Motley Fool] Red Hat Inc (NYSE:RHT)(TREND ANALYSISThere was plenty to like about Red Hat’s (NYSE:RHT) recently completed fiscal 2017 first quarter: revenue climbed double digits yet again, earnings per share (EPS) soared, and big-ticket sales reached a record high. Those types of results would generally translate to a boost in stock price. Unfortunately for Red Hat shareholders, it was not to be.

Not only did Red Hat’s stellar start to its fiscal year fail to impress, but its stock price is still down 10%, just as it was shortly after announcing Q1 results June 22. The culprit cited for the downturn was Red Hat’s guidance, which fell a bit short of vaunted analyst expectations; this was due in part to its recent acquisition of 3Scale, a “leading provider of application programming interface (API) management technology,” for an undisclosed sum.

While Red Hat’s short-term stock decline hasn’t done much for existing shareholders, it offers a world of opportunity for value investors with some patience.

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Red Hat Inc (NYSE:RHT) stock is currently trading 12.93% below its 52-week-high, 23.38% above its 52-week-low. The 1-year stock price history is in the range of $59.59 – $84.44. Red Hat Inc (RHT) has a price to earnings ratio of 64.49 versus Technology sector average of 24.21. RHT stock price has underperformed the S&P 500 by 18.8%. The Applications Software company is currently valued at $13.31 billion, and its share price closed the last trading session at $73.52. The stock has a 50-day moving average of $75.24 and a 200-day moving average of $72.79.

Red Hat Inc (RHT) current short interest stands at 4.76 million shares. It has decreased by 8% from the same period of last month. Around 3% of the company’s shares, which are float, are short sold. With a 10-days average volume of 1.42 million shares, the number of days required to cover the short positions stand at 3.4 days.

RHT is forecasted to report earnings per share of $0.35 and a revenue of $593.65 million for the 2nd Quarter of the fiscal year 2016. Red Hat Inc (RHT) declared last quarter earnings on June 22. The Applications Software company announced last quarter earnings per share of $0.52 against a consensus Street estimate of $0.50, beating the average estimate by $0.02. The company posted a revenue of $567.9 million compared to an estimation of $562.8 million.

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There are currently thirty analysts that cover Red Hat Inc stock. Of those thirty, twenty-three have a Buy rating, six have a Hold rating and one has a Sell rating. On a consensus basis this yields to an Overweight rating. The consensus target price stands at $87.69.

A recent analyst activity consisted of Morgan Stanley downgrading their Overweight rating to Equalweight on July 7. Morgan Stanley set their price target at $80. This corresponds to a 8.81% upside from the last closing price. On the date of report, the stock closed at $71.42.

William Blair reiterated their Outperform stance on July 5. On the date of report, the stock closed at $71.29.

Another research firm was Pacific Crest who upgraded their Sector Weight rating to Overweight on April 14. On the date of report, the stock closed at $74.45.

Company snapshot

Red Hat, Inc. develops and provides open source software and services, including the Red Hat Linux operating system. The Company’s Web site offers information and news about open source software and provides an online community of open source software users and developers.

Red Hat Inc (NYSE:RHT): Strong Price Momentum But will It Sustain? was last modified: July 21st, 2016 by Steven Finley