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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 (ORCL) and Microsoft (MSFT) create an interesting dilemma for investors, however we believe that Dell (DELL), IBM (IBM) and HP (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