Tuesday, September 21, 2004
Red Hat in red - Sales Shortfall, Stock slump
Yet another story of a high flyer promising a lot, but faltering on delivery. The latest story on redhat's earnings points out several potential weaknesses
- Enterprise sales not strong
- Enterprise pricing is weaker than anticipated
- Increasing deferred revenue (why?)
- Management appearing to withhold information
Even after a brutal 55% downfall in the last 4 months, the market cap of this stock is at 2.42B (stock price $13.2). Executives left the company, and it's taking a huge PR hit amongst the investment community for the decisions to keep some information private. The PE ratios are still hovering over 100 and price sales ratio is a hefty 20.
There's good news from the company as well. Profits grew a healthy 225% y/o/y and revenues are up 60% y/o/y. They have almost a Billion dollars in cash. 600M of that billion is offset by a convertible note (debt) convertible at 39.07. They look like they are on track to do about 180-200M in revenue this year and about 0.13c in earnings.
This stock is begining to look interesting at these price ranges. I wonder what would be a good price to get into? around 10?
