Rax Upgraded On Pacific Crest Report

In a report published this morning, Pacific Crest analyst Michael Bowen upgraded Rackspace Holding, Inc.

from Sector Perform to Outperform. Along with the rating upgrade, Bowen established a price target of $58. Bowen's call is based on the improvement of risk vs. reward profile coupled with improved EBITDA margin, despite revenues slightly underwhelming compared to estimate. In defense of his case, Bowen states, "Rackspace appears to have put operational missteps behind it, and has been accelerating the number of larger enterprise wins in recent months. We believe Rackspace will provide more consistent financial performance, including acceleration of sequential revenue growth and adjusted EBITDA margin expansion". Although there is a glut of market share lost to Amazon, Microsoft, and other OpenStack providers, Bowen believes management has improved operations and supports their 14%-18% revenue growth projection. As of Wednesday afternoon, Rackspace was trading up 1.81% at $50.78. At this current price, Bowen sees around 14% of upside compared to his $58 price target.