Shares of business software company Red Hat rose 10 percent Thursday as some Wall Street analysts raised their 12-month price targets in the wake of the company’s robust quarterly earnings.
“Red Hat is benefiting from improving execution and the maturing breadth of its emerging product portfolio,” BMO Capital Markets analyst Joel Fishbein Jr. wrote in a research note. He raised his price target, which previously was $77, to $83.
The Raleigh-based company’s closed Thursday at $75.36, up $6.91. Its shares are up nine percent this year.
Robert W. Baird & Co. analyst Steven Ashley noted that 80 percent of Red Hat’s largest deals in the quarter included “emerging technology” such as middleware, cloud products such as Red Hat Enterprise Linux OpenStack Platform and OpenShift, and data storage.
“Red Hat is successfully evolving from a tactical vendor of a single (power) product...to a strategic vendor of next-generation open source solutions,” Ashley wrote. He raised his price target from $75 to $80.
Red Hat’s bread-and-butter is its Linux operating system, but it has expanded into new markets in step with technological changes such as cloud computing. Its open source software is available for free, but the company charges business customers for maintenance, support and related services.
After the markets closed Wednesday, Red Hat reported that revenue rose 16 percent to $463.9 million in its fiscal fourth quarter that ended Feb. 28. Net income rose 7 percent to $80.6 million.
The company’s performance exceeded analysts’ expectations even though the strong dollar depressed its results. Revenue, for example, was up 22 percent after adjusting for currency fluctuations.