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Robert Stimson, an analyst with W. R. Hambrecht, today started coverage of Red Hat (RHAT) with a Buy rating and a $21 price target.

“Our investment thesis is predicated on the fact that software companies must offer solutions that provide the purchaser with tremendous ROI potential or enhanced functionality driving a competitive advantage in the marketplace,” he wrote in a research note this morning. “Accordingly, we believe that there are still enormous returns on investment opportunities associated with the Open Source movement…The recent announcements from Oracle (NYSE:ORCL) and Microsoft (NASDAQ:MSFT) create an interesting dilemma for investors, however we believe that Dell (NASDAQ:DELL), IBM (NYSE:IBM) and HP (NYSE:HPQ), etc., will stay the course and continue to support Red Hat, and the recent headlines have provided a unique opportunity to “get involved” in the Linux story.”

He sees the company earning 49 cents a share in the February 2007 fiscal year, and 63 cents in fiscal 2008.

Red Hat shares today have gained 53 cents to $17.03.

Source: Red Hat: Hambrecht Sees Upside To $21