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Analysts Raise Expectations for Rackspace After Cloud Company Posts Q4 Earnings
A “racker” working inside a Rackspace data center. (Photo: Rackspace)

Analysts Raise Expectations for Rackspace After Cloud Company Posts Q4 Earnings

Two financial companies significantly raise expectations for company’s stock price.


This article originally appeared at The WHIR

After Rackspace posted strong quarterly earnings on Tuesday, two financial companies have significantly raised their expectations for the company’s stock price. Cowan and Company released a report on Wednesday giving Rackspace shares a “buy” rating and setting a $75.00 price objective, WKRB reports, almost 50 percent above the current price.

In Q4 2014 Rackspace revenue was $472 million, up 15.8 percent over Q4 2013, earning it 26 cents per share, smashing analysts’ estimates of 19 cents per share. The company expects to revenue to grow between 14 and 18 percent in 2015, notwithstanding currency fluctuations.

Since research firm Stifel Nicolaus began covering Rackspace by issuing a “buy” rating, analysts at several other firms including Bank of America, Credit Agricole and Pacific Crest all raised their ratings and price targets for the hosting company’s shares, WKRB reports.

“The strong growth and improving margins that we’ve posted demonstrate the traction that we’re gaining as the leader of the managed cloud segment,” said Taylor Rhodes, president and CEO of Rackspace. “We will build on this momentum in 2015 by expanding the specialized expertise that we offer in areas such as ecommerce, big data and security. We’re helping more and more businesses leverage the power of the cloud without the pain of managing complex new technologies by themselves.”

Rackspace also announced Tuesday that John Harper, formerly CFO at Dell Services and Perot Systems, has joined its board of directors.

Rackspace began offering VMware vCloud in January, and also announced its OnMetal Cloud Big Data Platform in October.

It also flexed its legal muscle recently, winning the domain based on a brand copyright claim last month, and defeating a patent troll to nullify a screen rotation patent in September.

After back-to-back quarters of underestimating Rackspace, and perhaps the cloud hosting or managed hosting markets more generally, analyst expectations have risen, and the stock now has a consensus rating of “buy.” Rackspace was down slightly in Thursday trading after closing Wednesday at $51.12, just short of its 52-week high.

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