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Arthur Wang
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I found a new hobby as stock investor when I correctly predicted the falls of big organizations including Fannie Mae and Lehman Brothers. I consider myself as having an old fashion investing style. I tried to manage both risk and share size in a balanced fashion. Risk only you can take and... More
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  • Put Down The Fear And Realize The Value In Rackspace 0 comments
    May 16, 2014 2:43 PM | about stocks: RAX

    Many investors are worried about how the intense price war may squeeze out of Rackspace and was unconvinced about the OpenStack technology, a main value driver for Rackspace. But after the Q2 2014 Results on May 12, 2014, it has shown that the revenue has reaccelerated. According to the recent released report dated May 15, 2014 by Morgan Stanley, the analysts said that Rackspace had a market capitalization of about $4 billion and was the largest company in terms of acquisitions when comparing to SoftLayer, SAVVIS and Terremark, but has the cheapest stock price when valued by EV/EBITDA. Rackspace was trading at a multiple of 6.1 times 2015 estimated EV / EBITDA, and the average multiple "on an LTM EV / EBITDA pre-synergies basis" for the three deals is 15.7 times.

    From my previous article, Rackspace: Beyond The Price War, published on May 1, 2014 before the Q2 2012 Results, I have described how I identified values for the company and its future outlook despite numerous articles discussed about losing confidence in it. I think the values that I see are something more tangible than the short-lived stock price. The share price has soared over 30% since Monday. It looks dramatic, but I think this is just beginning since the price was already undervalued even when its quarterly earnings beat expectations. I think the current price is a reflection of fear, not by its performance or value.

    RAX Chart

    RAX data by YCharts

    Disclosure: I am long RAX.

    Stocks: RAX
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