The firm said it initiated coverage on the open source software solutions provider as it believes the company is a market leader and will continue to gain market share.
Shares of Red Hat are up by 0.29% to $69.09 in pre-market trading this morning.
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"In our view, Red Hat's standing as a leading provider of open source software solutions positions the company well for the build out of next generation data centers and new opportunities across the cloud computing landscape with a focus on the open hybrid cloud," Cantor Fitzgerald said.
Separately, TheStreet Ratings team rates RED HAT INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate RED HAT INC (RHT) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, solid stock price performance, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RHT's revenue growth trails the industry average of 26.3%. Since the same quarter one year prior, revenues rose by 15.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $132.99 million or 39.75% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.17%.
- RED HAT INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, RED HAT INC increased its bottom line by earning $0.93 versus $0.77 in the prior year. This year, the market expects an improvement in earnings ($1.55 versus $0.93).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market on the basis of return on equity, RED HAT INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Compared to its closing price of one year ago, RHT's share price has jumped by 25.74%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- You can view the full analysis from the report here: RHT Ratings Report