Morgan Stanley On Red Hat: 'Fundamentals Win, Another Solid Print In Q3'

reported its third quarter results on Thursday after market close. The company earned $0.42 in the quarter, topping analyst expectations of $0.40 while revenue of $456.0 million was higher than the $451.39 million analysts expected. Keith Weiss of Morgan Stanley explained in a note on Friday that the company's impressive earnings reflects its “solid underlying fundamentals” and that the company is “swiftly evolving from ‘the Linux company' to ‘the Open Source company.'” Shares were maintained with an Overweight rating with a price target raised to $77 from a previous $69. According to Weiss, Red Hat showed “stable growth” in the core Linux franchise which creates a solid foundation for a broadening platform of emerging technologies. The analyst adds that in addition to accelerating growth, the inclusion of emerging technologies “speaks to the increasingly strategic position of Red Hat.” Weiss argued in the beginning of December that a rising profile of open source software within mainstream IT deployments is a key theme heading in to the new year. The analyst now states that Red Hat's third quarter suggests that the company is “positioned to be the key beneficiary” of the theme.