Red Hat (NYSE:RHT) traded 6% lower on Thursday morning, after posting earnings that beat Wall Street expectations.
The open-source software company reported earnings per share of $0.85 and total revenue of $823 million, compared to analyst estimates of $0.81 and $827 million. The company expects earnings of $0.87 versus the consensus of $0.92, while its revenue guidance was in line.
“Our focus on customers helped drive strong results, as we delivered double digit growth for key financial metrics,” explained CEO James Whitehurst.
However, analysts such as JP Morgan’s Mark Murphy downgraded the stock, pointing to, “a lower renewals portfolio and headwinds against middleware growth.”
Our analysis focuses on the market cycles for RHT, which the chart below shows has begun the declining phase of its current cycle. This illustrates near-term downside risk, followed by a minor recovery, then more downside risk. Our target is $120 by year-end.
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