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Pacific Crest Upgrades Rackspace Hosting, 'Appears To Have Put Operational Missteps Behind It'

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In a report published Wednesday morning, Pacific Crest analyst Michael Bowen upgraded Rackspace Hosting, Inc. (NYSE: RAX) from Sector Perform to Outperform and established a $58 price target.

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 its 14 percent to 18 percent revenue growth projection.

Shares of Rackspace were recently up 2.1 percent at $50.98.

Latest Ratings for RAX

Nov 2016Deutsche BankTerminatesEqual-Weight
Aug 2016Raymond JamesDowngradesMarket PerformUnderperform
Aug 2016Tigress FinancialDowngradesStrong BuyNeutral

View More Analyst Ratings for RAX
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Posted-In: Michael Bowen Pacific CrestAnalyst Color Upgrades Analyst Ratings


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