E Red Hat: Selling For Our Bad Beat Investing Portfolio, Here Is Why

Red Hat (RHT) is an information technology name that provides open source software solutions to develop and offer operating system, virtualization, management, middleware, cloud, mobile, and storage technologies. The company has been widely successful in offering infrastructure-related solutions, such as Red Hat Enterprise Linux, an operating system platform that runs on hardware for use in hybrid cloud environments. It also operates the popular Red Hat Satellite, a system management offering that helps to deploy, scale, and manage in a hybrid cloud environment. These are just a few examples of the company’s innovative products. What about the stock?

The stock has run up tremendously in the last 52 weeks. In fact, it is one of the top performing holdings in the BAD BEAT Investing portfolio that is managed by Quad 7 Capital. Take a look at the tear the stock has been on:

Source: Yahoo finance

This performance has been incredible and has generated stellar returns for the portfolio. However, after such a major run, does performance still justify hanging on to the name here? Let us turn to recent performance in the most recent quarter and the year.

Top-line in the quarter, and year

Total revenue for the quarter was $772 million, up 23% year-over-year, or 18% measured in constant currency. Much of the revenue comes from recurring subscriptions, which is a primary reason we like the company. Subscription revenue for the quarter was $683 million, up 22% in year-over-year, or 18% measured in constant currency.

What about for the year? Well for the full fiscal year 2018 total revenue was $2.9 billion, up 21% year-over-year, or 20% measured in constant currency. Subscription revenue for the full year was $2.6 billion, up 21% year-over-year, or 19% measured in constant currency. For the year, subscription revenue in the full fiscal year was 88% of total revenue. This recurring revenue is very positive.

We like what we are seeing from subscriptions in the quarter. Subscription revenue from infrastructure-related offerings for the quarter was $510 million, an increase of 17% year-over-year, or 13% measured in constant currency. There was strong subscription revenue from application development-related and other emerging technology offerings for the quarter was $173 million, an increase of 39% year-over-year, or 34% measured in constant currency.

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Quad 7 Capital 3 years ago Author's comment

Here is a link to the BAD BEAT Investing portfolio.... seekingalpha.com/author/quad-7-capital/research