UPDATE: D.A. Davidson & Co. Initiates Coverage on Rackspace Hosting with Neutral Rating, $43 PT as Stock Faces Stiff Competition in SMB/Enterprise Cloud Market

In a report published Friday, D.A. Davidson & Co. analyst Mark Kelleher initiated coverage on

with a Neutral rating and $43.00 price target. In the report, D.A. Davidson & Co. noted, “Rackspace is benefiting from a continued trend towards outsourcing of IT services, and is one of the leading providers of such capabilities. We believe this market dynamic will continue, particularly as OpenStack matures as an open-source foundation for outsourced infrastructure. Rackspace differentiates its IT services by offering ‘fanatical support' to its customers. This high level of service is valued by the company's small-to-medium-sized (SMB) customers, but it provides less traction to Enterprise customers who are less likely to pay a premium for the service.” Rackspace Hosting closed on Thursday at $39.63.