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Upgrade Lifts Red Hat

The Street sees improving cash flow.
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A spate of favorable research notes and rumors of a big customer win pushed shares of

Red Hat


up more than 5% Tuesday. Volume was heavy.

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Prudential analyst Brent Thill raised his target price by $4 to $21, saying he expects second-quarter revenue to reach the high end of the company's guided range while operating cash flow should increase by 20% to 33% and deferred revenue by 73%. Prudential does not have an investment banking relationship with Red Hat.

Red Hat is the largest independent supplier of the Linux operating system, which in recent years has won a significant presence in the enterprise software market against conventional operating systems including Unix, Windows and Solaris.

Prudential's bullishness follows a similar move by Jefferies & Co. a day earlier. Jefferies analyst Katherine Egbert said she expects billings and cash flow to show improvement when the company reports results Sept. 28.

Egbert noted that the stock has run up a bit in the last few days on rumors of a large new customer contract, but those rumors did not figure into her upgrade. "We think it unlikely that a contract, or any other single event, produced meaningful upside in the August quarter." Jefferies does not have an investment banking relationship with Red Hat.

In recent trading, shares of Red Hat were off the day's highs but still up 56 cents, or 3.5%, to $16.74.