Friday the 13th turned out to be a particularly lucky day for
software maker. After dropping about 40% percent this month, and more than 90% this year, the stock finally had a stellar day, up almost 30%.
The boost, up $3.25 to $14.56 a share, came after Prakesh Patel, a
analyst, upgraded the stock to buy from market neutral, reflecting his optimism about the company's new subscription service. (Hambrecht hasn't done underwriting for Red Hat.) The service, called
Red Hat Network
, will allow Linux users to easily manage and update their servers, workstations and other devices. It'll notify customers when new software is available, and provide real-time bug fixes and security patches. And Durham N.C.-based Red Hat gets a fee for this.
"There is now revenue opportunity from every device running on a Linux operating system," Patel says. "We view this network as the answer to the repeated question, "But how is Linux going to make any money?'"
On Sept. 25, the software company began offering a free 90 day trial to customers. After Jan. 1, prices for the service will range from $9.95 to $200 a month per device, according to Patel's report.
"We feel that shares of Red Hat are currently undervalued and do not fully reflect the recent progress of Red Hat in capturing and dramatically expanding its revenue opportunity," Patel wrote. He expects the stock to reach $30 within a year.
But concerns about Red Hat remain. And its Friday surge may have stemmed at least in part from the big rally in tech stocks. "This movement isn't necessarily a forecast," said Nicholas Moore, portfolio manager at
Jurika and Voyles
, which has no position in Red Hat. "Don't use today's stock movement as an indication of company fundamentals."