Red Hat, Inc. (RHT)
Industry: Application Software
Market Cap: 21.49B
Earnings Yield: 1.2%
Red Hat, Inc. provides open source software solutions to develop and offer operating system, virtualization, management, middleware, cloud, mobile, and storage technologies to various enterprises worldwide. It offers infrastructure-related solutions, such as Red Hat Enterprise Linux, an operating system platform that runs on hardware for use in hybrid cloud environments; Red Hat Satellite, a system management offering that helps to deploy, scale, and manage in hybrid cloud environments; and Red Hat Enterprise Virtualization, a software solution that allows customers to utilize and manage a common hardware infrastructure to run multiple operating systems and applications. The company offers application development-related and other technology solutions, such as Red Hat JBoss Middleware, a solution for developing, deploying, and managing applications; integrating applications, data, and devices; and automating business processes in hybrid cloud environments; Red Hat cloud offerings, a software solution that enables customers to build and manage various cloud computing environments; Red Hat Mobile, a software development platform that enables customers to develop, integrate, deploy, and manage mobile applications for enterprises; and Red Hat Storage, a software solution that enables customers to manage large, unstructured, or semi-structured data in hybrid cloud environments. It also provides consulting, support, and training services; and real-time operating system, distributed computing, directory services, and user authentication. Red Hat, Inc. has a collaboration with Wipro Limited to set up a cloud application factory that offers developers and IT teams a methodology for application modernization across public, private, and hybrid clouds. The company was formerly known as Red Hat Software, Inc. and changed its name to Red Hat, Inc. in June 1999. Red Hat, Inc. was founded in 1993 and is headquartered in Raleigh, North Carolina.
Red Hat has seen steady growth in recent years. Net Income was 253.70M in the 2017 report, which was up from 199.37M in 2016 (+27.25%). Revenue was also up in the 2017 report; a reported 2.41B in 2017 from 2.05B in 2016 (+17.56%). RHT has seen amazing market performance in 2017. A share is currently $121.10, which is up from $69.70 at the close of 2016, which is a YTD increase of (+73.74%). Red Hat, however, does not distribute dividends; therefore, we will not be able to rely on that for cash flow.
Here is a chart showing the YTD performance for Red Hat. It is also overlaid with the performance of IYW, which is an iShares ETF for US Tech companies. Red Hat actually makes up 0.44% of IYW, so it is a good comparison for the technology sector.
There does not appear to have been any major changes in management. In terms of insider trading, Red Hat has seen 9 major insider buys compared to 12 sells over the past 3 months for a net change of (46,676) shares.
0.52% of shares are held by insiders while 97.98% of shares are held by institutions. The two largest institutions are T. Rowe Price and Vanguard with 13.38% and 9.93% respectively. Last year, Red Hat announced a share buyback program with a budget of $1 Billion dollars; this is often seen as a company betting on itself that it will appreciate in value.
Last week, Red Hat and Alibaba, the e-commerce giant, announced a deal that will allow Alibaba to start selling Red Hat’s business software globally. Many Fortune 500 companies already run Red Hat’s Linux based software, and this deal will allow Red Hat to gain even more customers, as their software should be available from Alibaba’s cloud in the coming months. This deal will help Red Hat strengthen its presence as world’s leading provider in open-source solutions, which coincides with one of their main goals from their annual shareholders meeting in 2017.
The company believes that they should have a positive outlook; however, they acknowledge that there are risks a plenty. The general nature of the technology sector and open-source software causes it to be highly competitive. Microsoft is named as one of their main competitors. They believe that there are several inherent risks present; however, this is likely just a requirement for them to acknowledge to their shareholders that they are aware of said risks.
Experts are very high on Red Hat. On Yahoo Finance, most of the experts suggest it as a buy, as shown in the graphic below. Analyst for MarketWatch give very favorable opinions as well. Although Red Hat has very high valuation ratios, it appears that their strong performance is causing experts to be optimistic that they can continue to increase in value.