Seeking Alpha
 

Rackspace Hosting, Inc. (RAX)

- NYSE
  • Thu, Feb. 19, 2:58 PM
    • Today's notable tech gainers include fiber equipment provider Zhone (ZHNE +10.6%), IP licensing firm VirnetX (VHC +7%), healthcare software provider Allscripts (MDRX +4.8%), app development software provider Pegasystems (PEGA +6%), software outsourcing firm EPAM (EPAM +5.6%), security software/service provider Imperva (IMPV +5.3%), and cloud HR software provider Paylocity (PCTY +4.5%).
    • Notable decliners include Chinese search/app store/security app provider Qihoo (QIHU -5.2%), Web hosting/cloud infrastructure provider Rackspace (RAX -3.9%), LED equipment maker Veeco (VECO -4.9%), and analog/mixed-signal chipmaker MagnaChip (MX -5%). The Nasdaq is up 0.4%.
    • VirnetX is adding to the Wednesday gains seen after Apple patent review petitions were denied, and Qihoo is adding to the losses seen following a Jefferies downgrade.
    • Rackspace and Veeco are reversing the gains they saw yesterday after posting their Q4 reports (I, II), and then some. MagnaChip is now down 58% since posting its Q1-Q3 results a week ago.
    • Previously covered: SolarCity, Facebook, Castlight, Applied Materials, DragonWave, Nimble Storage, AVG, Ascent Solar, Netlist
    | Thu, Feb. 19, 2:58 PM | Comment!
  • Wed, Feb. 18, 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
    | Wed, Feb. 18, 12:15 PM | 9 Comments
  • Tue, Feb. 17, 5:37 PM
    • Top gainers, as of 5:15 p.m.: ENPH +14.1%. BSX +11.6%. PBPB +9.9%. LINC +8.7%. YGE +6.9%.
    • Top losers, as of 5:15 p.m.: PERY -14.3%. FOSL -13.4%. ZIXI -10.0%. LZB -7.3%. RAX -4.6%.
    | Tue, Feb. 17, 5:37 PM | Comment!
  • Tue, Feb. 17, 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
    | Tue, Feb. 17, 4:22 PM | 2 Comments
  • Tue, Feb. 17, 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%.
    • Press Release
    | Tue, Feb. 17, 4:03 PM | Comment!
  • Mon, Feb. 16, 5:35 PM
  • Thu, Jan. 15, 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).
    | Thu, Jan. 15, 6:04 PM | Comment!
  • 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.
    | Dec. 12, 2014, 9:23 AM | 2 Comments
  • 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. 20, 2014, 5:17 PM | Comment!
  • 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. 13, 2014, 11:45 AM | Comment!
  • 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, 4:43 PM | 4 Comments
  • Nov. 11, 2014, 9:17 AM
    | Nov. 11, 2014, 9:17 AM | 1 Comment
  • 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, 4:46 PM | 1 Comment
  • 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, 4:28 PM | Comment!
  • 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.
    • Press Release
    | Nov. 10, 2014, 4:11 PM | Comment!
  • Nov. 9, 2014, 5:35 PM
Visit Seeking Alpha's
RAX vs. ETF Alternatives
Company Description
Rackspace Hosting Inc, through its operating subsidiaries, is a provider of cloud computing services, managing web-based IT systems for small and medium-sized businesses as well as large enterprises.