GO
Loading...

Cramer’s Red Hat tell: Valuable investor insights

Listen up investors. "We just got an important 'tell' from Red Hat," said Jim Cramer.

As a company whose products are used by Salesforce, Amazon and other firms to power their cloud infrastructure, Cramer had been eager to hear from Red Hat for quite some time.

He felt results could provide valuable insights into the sector and perhaps the health of American business, broadly. Here are Cramer's takeaways.




First looking at earnings, the company beat expectations, a sign of strength.

Although Red Hat's net income fell to $37.7 million, or 20 cents per share, in the first quarter, from $40.4 million, or 21 cents per share, a year earlier, excluding items, the company earned 34 cents per share beating analysts' expectations of 33 cents per share, according to Thomson Reuters I/B/E/S.

Meanwhile, revenue rose 17 percent to $423.8 million, above Wall Street estimate of $414 million.

"That's a stellar quarter," Cramer noted.

However, more important were billings. "That's a key metric for this stock," Cramer said. And billings really outperformed expectations. They rose 17 percent in the quarter ended May 31, above analysts' expectations of growth of 15 percent.

"Also, deferred revenue increased by 20% year over year, and management raised its revenue guidance for the full fiscal year," Cramer said.

Considering the company counts 90 percent of the Fortune Global 500 as customers, the results suggest the recovery remains on solid footing.

That alone is a valuable 'tell' but if you're a stock investor, there's more. Shares spiked 8 percent on the news, although they later pared some of those gains.

Considering Red Hat is a high multiple tech stock, that says to Cramer the Street may be ready to embrace at least some of the better names in the group. That too is an important 'tell' because the Street has shunned high multiple tech for months.

---------------------------------------------------------
Read more from Mad Money with Jim Cramer
Cramer developing taste for imported beer
Shouldn't US energy boom sideline Iraq
'Basic" way to play energy theme
---------------------------------------------------------

All told, Cramer thinks Red Hat has provided investors with valuable insights.

And it appears he's not the only one.

"Given that Red Hat's business can tend to be a little slow in their first fiscal quarter, this would appear to be a really solid start to fiscal year 2015," Evercore Partners analyst Kirk Materne said.

If nothing more, results are food for thought.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

Symbol
Price
 
Change
%Change
RHT
---
CRM
---
AMZN
---

Contact Mad Money

  • Showtimes

    U.S.
    Monday - Friday 6p ET
    Australia
    Saturday 8a, 1p, 7p SYD
    Sunday 12a, 1a, 8a, 7p SYD
    New Zealand
    Saturday 10a, 3p, 9p NZ
    Sunday 2a, 3a, 10a, 9p NZ
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.