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After a December sell-off, Red Hat stock is back on the upswing this year. (Red Hat)

Red Hat (RHT) stock has rebounded after disappointing current-quarter guidance sent shares in the Linux software provider down in late 2016, and a William Blair analysts says the company is gaining traction in cloud computing.

Red Hat stock is up 13% in 2017, moving above it's 50-day moving average last month and approaching a technical buy point of 82.83 out of a 20-week consolidation.

Shares of Red Hat traded in the 70s most of last year but plunged 14% on Dec. 22, to an 11-month low, after theenterprise software provider forecast current-quarter sales well below consensus estimates. Red Hat stock was unchanged in morning tradein the stock market today, after closing Friday at 79.25.

Jason Ader, a William Blair analyst, says Red Hat should disclose more metrics related to its cloud business. Red Hat, along with Microsoft (MSFT) and VMware (VMW), aims to leverage its existing customer base as cloud computing gains momentum.

IBD'S TAKE:Red Hat has the second highestComposite Rating, a CAN SLIM investing metric, of the eight companies in IBD's Computer Software-Desktop group, which also includes Microsoft and Adobe Systems. The group ranks only No. 119 out of 197 industry groups. Adobe has a CR of 89 out of a possible 99, while Red Hat's CR is 79.

"The reality check from our perspective is that Red Hat's strategic positioning appears firmly intact, midteens revenue growth looks sustainable, operating leverage is around the corner, and management seems aware of the need for greater disclosure on hot-button topics that could shift the narrative in the near term," Ader said in a research report Monday.

Ader, who says he met recently with company management, maintains an outperform rating on Red Hat stock.

Red Hat's Linux software runs computer servers in corporate data centers. The company'sbiggest revenue generator is Red Hat Enterprise Linux (RHEL).

Analysts have been looking for traction in Red Hat's public cloud business as customers shift computing workloads to cloud service providers such as Amazon Web Services, part ofAmazon.com and a Red Hat partner.

Red Hat's cloud revenue mainly comes from customers using RHEL software on a "pay as you go," or software-as-a-service, basis. It also aims to sell customers a broader set of software for managing application servers and data storage.

"Management believes that public cloud RHEL revenue and market share is significantly higher than meets the eye, as the cloud access piece of the business is larger than the transactional, on-demand piece," Ader said in the report. "While management is unable to track and quantify the cloud access component, steady RHEL growth in the midteens supports the conclusion that the public cloud is currently more of a tailwind than a headwind to the business."

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Red Hat Stock Could Get Boost From More Cloud Disclosure - Investor's Business Daily