Morgan Stanley Thinks Graham Weston's Return to Rackspace Hosting Has Overshadowed Solid Numbers

In a report published Tuesday, Morgan Stanley analyst Simon Flannery reiterated an Equal-Weight rating on

. In the report, Morgan Stanley noted, “Executive Chairman and founder Graham Weston is returning to the CEO role he left in 2006, as RAX starts a search to find a permanent replacement for Lanham Napier, who had been with the company for 14 years. This overshadowed 4Q13 numbers, which were generally better than our expectations. Revenues grew 5.0% sequentially to $408.1M, $2.8M ahead of our estimate, helped in part by FX ($4.2M tailwind) and seasonality with strong managed hosting revenues, although public cloud growth slowed and installed base growth was below expectations (0.4% versus MSe of 0.7%). Improved revenues translated into a $6M beat to EBITDA versus expectations with margins basically flat sequentially, although well down Y/Y. Capital intensity improved from the elevated levels of 3Q13 and was below our expectations, but was still up 32% Y/Y.” Rackspace Hosting closed on Monday at $40.36.