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Feb. 18, 2015, 12:15 PM
- Down AH yesterday due to the light sales guidance provided with its mixed Q4 results, Rackspace (RAX +1.4%) is now back above $50. Helping its cause: Pac Crest has upgraded to Outperform, and at least four firms have hiked their targets.
- Pac Crest cites enterprise and OpenStack momentum as reasons for upgrading: "In the second half of 2014, Rackspace won more large enterprise contracts worth at least $100,000 per month than it had in the prior five quarters combined ... management indicated that OpenStack now makes up more than 50% of its public cloud revenue, which implies OpenStack revenue is at least 15.6% of its total revenue."
- Cowen (target hiked to $75) now considers it likely Rackspace "will announce support for a mega cloud provider in 1H15," thereby boosting its long-term addressable market and lowering future capex needs (in exchange for sharing revenue). It adds sales guidance was in-line after adjusting for forex, and that EBITDA margin guidance was better than expected.
- Meanwhile, new CEO Taylor Rhodes argues the cloud infrastructure (IaaS) market's price war is calming down. "Amazon Web Services (NASDAQ:AMZN) in November, for the first time, didn’t make a price cut move ... AWS is feeling like they are the reference brand leader, that they are strong versus Google (NASDAQ:GOOG), so they don’t need to do it as much. Microsoft (NASDAQ:MSFT) is cutting price, but who knows how much share they are actually taking."
- He also reiterates Rackspace's assertion that its OpenStack/hybrid cloud offerings are differentiated in the battle for enterprise accounts. "The mainstream market has two problems: They have legacy apps that won’t go [to multi-tenant public clouds] automatically ... the second problem they have is this skills set gap ... There is a need for software and tools development."
- Q4 results, guidance/details
Feb. 17, 2015, 5:37 PM
Feb. 17, 2015, 4:22 PM
- With forex providing a 1% headwind, Rackspace (NYSE:RAX) expects Q1 revenue of $477M-$488M, below a $490.5M consensus. Full-year revenue guidance is at $2B-$2.1B vs. a $2.08B consensus (2% forex headwind).
- Q4 adjusted EBITDA margin was 35%, +50 bps Q/Q and +260 bps Y/Y, and at the high end of a 33%-35% guidance range. However, Q1 guidance is at 32%-34% (cloud price pressure?), and full-year guidance at 33%-36% (still favorable to 2014's 33.7% at the midpoint).
- Dedicated cloud (Web hosting) revenue rose 8% Y/Y in Q4 to $324.7M, a slowdown from Q3's 14%. Public cloud revenue (inc. OpenStack) grew 26% to $147.7M after growing 29% in Q3. Servers deployed rose to 112.7K from 110.5K in Q3 and 103.9K a year ago, and average revenue/server grew to $1,412 from $1,405 and $1,322.
- Gross margin was 67.4%, up 20 bps Y/Y but down 150 bps Q/Q. Total costs/expenses rose 11% Y/Y to $422.4M (less than revenue growth of 15.8%).
- Free cash flow was $55M, above net income of $36.9M. $105M (22% of revenue) was spent on capex.
- Shares have fallen to $47.00 in AH trading. They went into earnings up more than $12 from where they traded prior to Rackspace's Q3 report.
- Q4 results, PR
Feb. 17, 2015, 4:03 PM
- Rackspace Hosting (NYSE:RAX): Q4 EPS of $0.26 beats by $0.07.
- Revenue of $472.42M (+15.8% Y/Y) misses by $1.56M.
- Shares -3.77%.
Feb. 16, 2015, 5:35 PM
Jan. 15, 2015, 6:04 PM
- Rackspace (NYSE:RAX) will report Q4 results after the close on Tuesday, February 17. The conference call will begin at 4.30 pm ET.
- Consensus views are for EPS of $0.19 and revenue of $474.51M (+16.3% Y/Y).
Dec. 12, 2014, 9:23 AM
- Though Rackspace's (NYSE:RAX) decision to differentiate itself in a very competitive cloud infrastructure market by sticking to its historical focus on "fanatical service" is a sound one, the "steady inherent growth presented by the service market has been more than adequately priced into the stock," says D.A. Davidson's Mark Kelleher, downgrading to Underperform.
- His $40 target is equal to 7x Davidson's 2016 EBITDA forecast of $793M. Rackspace was up 77% from its May low of $26.18 going into today.
Nov. 20, 2014, 5:17 PM
- Rackspace (NYSE:RAX) founder/chairman Graham Weston has bought $2.5M worth of shares on Tuesday at an average price of $42.75, and plans to buy up to $2.5M more over the next year through a 10b5-1 trading plan.
- Weston's move comes in the wake of last week's big post-earnings gains. Rackspace is making new 52-week highs in AH trading.
Nov. 13, 2014, 11:45 AM
- Todd Cione, formerly Rackspace's (RAX +1.9%) SVP of Americas sales, is now the company's chief revenue officer. Cione's new job puts him in charge of "the operations of the Americas sales and global marketing organizations." (PR)
- Before joining Rackspace last year, Cione spent 15 years at Microsoft. News of his promotion comes a couple days after Rackspace blasted off in response to its Q3 numbers and buyback announcement.
Nov. 11, 2014, 4:43 PM
- Rackspace's (NYSE:RAX) Q3 numbers show the company "can carve out a niche" in a very competitive cloud infrastructure market by focusing on service quality, thinks Credit Suisse, hiking its target to $45. The firm also argues the re-acceleration seen in Rackspace's revenue growth points to improved execution.
- Likewise, Oppenheimer asserts Rackspace appears to be achieving "a customer care niche in hybrid cloud that is defensible." It recommends buying if shares fall again in response to Amazon price cuts; with Google having just slashed prices, Amazon might respond at this week's AWS re:Invent conference.
- Canaccord, however, is still cautious. "Although the management transition has been executed better than we had expected with respect to the Q3/14 results, we are not convinced we are on a complete road to recovery and that the countervailing trends of intense competitive pressures, contrasted with the strong secular demand, warrant a HOLD rating."
- Shares made new 2014 highs today. They're still well below an early-2013 high of $81.36.
- Prior Rackspace coverage
Nov. 11, 2014, 9:17 AM
Nov. 10, 2014, 4:46 PM
- Along with its Q3 results, Rackspace (NYSE:RAX) announces it's launching a $500M buyback program. At current levels, the program is good for repurchasing 9% of outstanding shares.
- Rackspace had $349M in cash to finance buybacks with at the end of Q3, and $31M in debt. The buyback will be kicked off with a $200M accelerated share repurchase.
- RAX +2.9% AH. Q3 results, guidance/details.
Nov. 10, 2014, 4:28 PM
- Rackspace (NYSE:RAX) expects Q4 revenue of $469M-$476M, below a $476.5M consensus. Forex is expected to have a $5M revenue impact.
- Q3 adjusted EBITDA margin was 34.5%, +240 bps Q/Q and +220 bps Y/Y, above guidance of 31%-33%, and well-received in light of the cloud infrastructure (IaaS) price pressure Rackspace has seen. Q4 guidance is at 33%-35%. A recent pricing overhaul is likely helping.
- Adjusted free cash flow was $41.5M, above net income of $25.7M. Capex still amounted to $117M (a steep 25% of revenue).
- Gross margin rose 180 bps Q/Q and 170 bps Y/Y to 68.9%. As a result, GAAP costs/expenses were 91.2% of revenue, down from 92.3% in Q2 and 92.9% a year ago.
- Dedicated cloud (Web hosting) revenue +14% Y/Y to $319.6M. Public cloud (IaaS) revenue +29% to $140.2M.
- Servers deployed rose 3% Q/Q to 110.4K, and average revenue/server rose by $30 to $1,405. Churn rose slightly to -0.6%, and net upgrade rate fell slightly to 1.4%.
- Q3 results, PR
Nov. 10, 2014, 4:11 PM
- Rackspace Hosting (NYSE:RAX): Q3 EPS of $0.16 in-line.
- Revenue of $459.8M (+18.4% Y/Y) beats by $1.4M.
Nov. 9, 2014, 5:35 PM
Oct. 30, 2014, 11:17 AM
- In addition to posting mixed Q3 results, Equinix (NASDAQ:EQIX) is guiding for Q4 revenue of $627M-$631M, below a $642M consensus.
- However, the data center owner reported a 3.4K Q/Q increase in net billable cabinets for Q3, a record figure and (as noted on the CC) 70% above Equinix's 4-quarter average. Total billable cabinets stand at 96.1K - 44.9K in North America, 32.2K in Europe, 19K in Asia-Pac.
- Likewise, cross-connects rose by 5.7K to 141.2K, and exchange ports by 143 to 2,557. Total customers rose by 60 to 4,700, with the termination rate falling to 1.9% from 2.7% in Q2 and 2.5% a year ago.
- Gross margin was 68%, flat Q/Q and Y/Y. Adjusted EBITDA margin was 46% vs. 45% in Q2 and 46% a year ago. $43M was spent on buybacks. Equinix ended Q3 with $501M in cash, and $4B in debt.
- Equinix is guiding for full-year adjusted discretionary free cash flow of $590M-$620M, and adjusted funds from operations (AFFO) of greater than $745M. REIT approval is still expected by year's end.
- Several data center colocation, Web hosting, and interconnection services firms are also higher on a day the Nasdaq is down 0.5%. RAX +1.5%. INAP +3.5%. DLR +1.3%. CONE +1.4%.
- Q3 results, PR, slides (.pdf), datasheet (.pdf)
Other News & PR