Shares of Red Hat Inc. dropped Thursday a day after the company behind the Linux open source operating system gave a revenue outlook below Wall Street's expectations.
THE SPARK: Red Hat said late Wednesday that it expects adjusted earnings of 28 cents to 29 cents per share for the current quarter, on revenue of $320 million to $322 million. Analysts, on average, are expecting earnings of 29 cents per share on revenue of $331 million.
Some analysts also expected a bigger increase in bookings than the 16 percent rise the company reported for its fiscal first quarter. Billings, a key revenue indicator, refers to revenue a company must defer until it provides the goods or services the money covers.
Citi Investment Research analyst Walter Pritchard said the market expected billings to rise 18 percent to 19 percent. He had forecast an even bigger 22 percent increase.
ANALYSIS: BMO Capital Markets analyst Karl Keirstead said that, while Red Hat's billings report was "modestly disappointing," it does not materially affect the company's overall growth trajectory. He kept an "outperform" rating on the stock.
SHARE ACTION: Shares of Raleigh, N.C.-based Red Hat fell $3.44, or 6.1 percent, to $53.06 by late Thursday. The stock has traded between $31.77 and $62.75 over the past year.