Market Overview

Rackspace Will Outperform Market Despite Sentiment Issues, JMP Predicts


In a report published Monday, JMP Securities analysts Patrick Walravens and Peter Lowry reiterated a Market Outperform rating and $62 price target on Rackspace Hosting, Inc. (NYSE: RAX), on the back of “positive business momentum and an AWS offering,” and in spite of negative sentiment.

The analysts attended the company's Rackspace: Solve 2015 event in Dallas and the Red Hat (NYSE: RHT) Summit in Boston last week, and made the most of both events by running some industry checks.

First, the analysts wanted to address the negative the sentiment issue, following disappointing first quarter results. The firm “asked partners and industry sources what they thought of Rackspace’s current business momentum and value proposition, which yielded seven positive and one negative data points."

Next, Walravens and Lowry explored with industry sources and partners if, Inc. (NASDAQ: AMZN) would “allow Rackspace to manage workloads on Amazon Web Services (AWS)." The analysts also collected seven positive and one negative data points on the subject.

The firm is modeling earnings of $0.89 per share for 2015, above consensus of $0.87 per share; earnings of $1.15 per share for 2016, versus consensus of $1.11 per share; and earnings of $1.53 per share for 2017, compared to consensus of $1.34 per share.

Rackspace’s stock trades at a 2016E EV/adjusted EBITDA multiple of 6.3x and a 2016E EV/revenue multiple of 2.2x. Meanwhile, JMP’s target of $62 implies respective multiples of 10.5x and 3.7x.

Latest Ratings for RAX

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

View More Analyst Ratings for RAX
View the Latest Analyst Ratings

Posted-In: JMP JMP Securities Patrick Walravens Peter Lowry Rackspace: Solve 2015Analyst Color Reiteration Analyst Ratings


Related Articles (AMZN + RAX)

View Comments and Join the Discussion!

Latest Ratings

BIIBCantor FitzgeraldDowngrades0.0
WEXSunTrust Robinson HumphreyMaintains215.0
GISCredit SuisseMaintains52.0
OWells FargoMaintains78.0
HASWells FargoMaintains82.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Trader Essentials
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Mastercard Remains 'Core Holding' For SunTrust

Needham Analysts Met With SolarCity Management; Here's What Happened