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Shares of Linux distributor Red Hat are up 10% in the pre market after Q4 revenue and earnings that topped analysts’ estimates. Revenue in the three months ended February 28th rose 25%, year over year, to $245 million, earnings rose to 26 cents. Analysts consensus has been revenue of $236 million and earnings of 22 cents. CEO Jim Whitehurst said the company is on track to make $1 billion in revenue next fiscal year. The consensus is $1.03 billion in revenue for fiscal 2012. Charlie Peters, the CFO, said Red Hat’s billings rose at a rate of more than 30% in the quarter, the fastest rate in three years. Red Hat ended the quarter with $1.2 billion in cash
Based on accelerating business trends (billings +31% YoY) and longer-term prospects, driven by factors including JBoss, which has significant potential and cloud architectures which should help shift market share from Windows, the stock meets four of the six screens of the ZYX Change Method. Risk is higher when all six screens of the ZYX Change Method are not met.
As the chart shows, the best way to trade is to buy on a pullback. Please be aware that JP Morgan has issued a sell on this stock, but JP Morgan has been a bear on the stock for a while and they have been wrong.
When and if the stock meets all six screens of the ZYX Change Method, we will inform you in real time.