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Red Hat Inc.

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Red Hat reported strong first-quarter fiscal 2018 results, beating the Zacks Consensus Estimates on both line. The company is benefiting from strong deal win, improving recurring revenues and cross-selling of cloud-based technology. Based on the strong first-quarter results, management raised fiscal 2018 guidance. We believe Amazon Web Services OpenShift partnership extension reflects strength in Red Hat’s solutions and platform. The acquisition of Codenvy, which will boost its position in the hybrid cloud computing market. Further, it has a strong customer as well as partner base that include the likes of IBM, Intel, Dell Technologies, Google cloud platform and Microsoft Azure. We note that the company has outperformed the S&P 500 index on a year-to-date basis. However, intensifying competition, growing U.S. government exposure and foreign exchange volatility are some of the headwinds, in our view.

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