4 Opportunities That Could Write The Next Chapter Of Red Hat's Growth Story

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Red Hat IncRHT
's
earnings report came in better than expected on multiple fronts, including revenue, billings, margins and earnings per share, Wells Fargo's Siti Panigrahi commented in a research report. The analyst maintains an Outperform rating on
Red Hat's stock
with a price target boosted from $120 to $124 as the bullish case remains in place.

Revenue outperformance in the quarter can be attributed to ongoing momentum in the core RHEL segment along with an increase in cross-selling opportunities from emerging technologies and consulting services, Panigrahi noted. In addition, infrastructure-related subscription revenue grew 13.5 percent year-over-year and app development and emerging technologies saw a re-acceleration in revenue growth.

Overall, Red Hat's earnings report reinforces the fact that the company is well positioned to benefit from the secular trend in
hybrid cloud adoption
. But Red Hat's ultimate growth opportunity will come from:
    1. Continued adoption of Red Hat Linux for mission-critical workloads.
    2. Cross-selling opportunities from its emerging technology group to the large installed Linux base.
    3. Expected demand for OpenStack-based hybrid cloud.
    4. Large deal renewals expected to begin in the bottom half of fiscal 2018.

Bottom line, Red Hat "pioneered" the open-source model and dominates the Linux operating system market but now has "extended its success to a broad stack of technology for private cloud deployment."

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At last check, shares of Red Hat were up 4.56 percent at $110.59.

Related Links:A Tip Of The Cap To Red Hat's Strong Quarter: Sell-Side RoundupA Stellar Q1 For Red Hat
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Image Credit: By Harald Hoyer from Schwerin, Germany - Dripping, CC BY-SA 2.0, via Wikimedia Commons
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Posted In: Analyst ColorLong IdeasNewsPrice TargetReiterationAnalyst RatingsMoversTechTrading IdeascloudLynuxOpenStackRHELSiti Panigrahi
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