Thomas Weisel upgraded Red Hat (RHAT) to outperform from peer perform.
Analyst Tim Klasell says after channel checks, he believes upside exists to the Street's estimate of 19 cents earnings per share for fiscal 2005 (Feb.). He thinks growth in server shipments is the main driver, along with valuation, over the near term.
Klasell expects Red Hat to capture 40% to 50% market share in the overall Linux server standalone market. He says near-term momentum is good, as Red Hat is benefitting from the Unix cycle as customers opt for cheaper Linux, instead of renewing their contracts with Unix vendors.
Over the long term, Klasell says Red Hat will expand into new markets such as infrastructure software and support for other hardware platforms. He raised the 16 cents fiscal 2005 earnings per share estimate to 23 cents.