Rackspace: 8 Firms Start Coverage; Shares Can Use a Lift
The post-IPO quiet period has expired on Web-hosting provider Rackspace (RAX), triggering a flood tide of research from the Street. The stock can clearly use the help: Rackspace went public in August at $12.50 a share, but has never actually traded that high; the stock this morning is changing hands at $9, up 17 cents, or 1.9 percent on the day, but still down $3.50, or 28 percent, since the IPO.
Rackspace has clearly gotten out the message; the reports this morning are remarkably uniform. (And note that all of the firms that launched coverage were involved in the company’s IPO.) In short, they tend to agree that the company’s near-term profitability will be muffled by a capital investment cycle, and they also note that the macro picture is not in their favor. On the other hand, the Street thinks the opportunity in “managed” hosting services in strong, and the analysts point out that the company continues to grow its topline at better than 50 percent a year.