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Sell side weighs in on Rackspace

Sep. 17, 2014 11:47 AM ETRackspace Hosting, Inc. (RAX) StockRAXBy: Stephen Alpher, SA News Editor6 Comments
  • The lack of a sale isn't as surprising or disappointing as Rackspace's (RAX -16.1%) decision not to launch a buyback, says Cowen's Colby Synesael, nevertheless reiterating an Outperform rating on the stock. The company, he says, has more than enough capacity to retain financial flexibility and repurchase shares, a thought he expects other investors will echo to management in the coming weeks.
  • Blair's Jim Breen - who also rates the stock Outperform - is less disappointed in the lack of buyback and calls Rackspace's decision to stay independent "prudent" given accelerating revenue. "Further, we believe that Rackspace’s chief competitor, Amazon Web Services, may become less aggressive with its price decreases after Amazon’s second-quarter results exhibited a year-over-year decline in other revenue, which is a proxy for its cloud business."
  • Needham's Richard Kugele - who has a Hold rating on the stock - wasn't surprised by the lack of a sale. He's believed from the start there was a disconnect between what the board wanted and what buyers "in the new cloud landscape would bear."
  • One downgrade comes from Credit Suisse, which cuts to a Sell.
  • Previously: Rackspace can't find a buyer; -16.5% after-hours

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