Fri, Apr. 24, 11:08 AM
- In its first quarter of breaking out Amazon Web Services' results on their own, Amazon reported the business had Q1 revenue of $1.57B (+49% Y/Y) and (notably) a $265M op. profit (+8%).
- Rival Rackspace (NYSE:RAX) is getting a lift from the numbers ahead of its May 11 Q1 report. For reference, Rackspace had Q4 public cloud segment revenue of $147.7M (+26% Y/Y, 31% of total revenue).
Mon, Apr. 20, 4:09 PM
- Equinix (EQIX +1.6%) should post revenue and EBITDA ahead of Street estimates amid "y/y growth in MRR ... and a secular shift to the cloud," according to Pacific Crest's Michael Bowen and Trevor Upton. It's one of five stocks that Pacific Crest mentioned buying into upcoming earnings in its Q1 Communications Services Preview.
- The stocks all get an Outperform rating from the analysts. Equinix received a $255 price target and the firm "would remind investors that our bull case on shares remains $280." Shares closed today at $239.80 and the firm reports April 29.
- Rackspace (RAX +0.9%) also benefits from shifting business, the firm says: "We believe we are in the early stages of a secular shift from on-premise data centers to hybrid clouds made up of private and public cloud platforms. We believe the company is executing more efficiently and improving its managed service value proposition." Their price target is $58; shares closed today at $52.53 and the company reports May 11.
- SBA Communications (SBAC +1.8%) got a price target of $138 on expectations of strong leasing activity and hearing about positive impact from the FCC's last spectrum auction; it closed today at $121.84 and reports on Friday.
- Cogent Communications (CCOI +1%) received a price target of $45 and closed today at $34.24; it reports May 7. GTT Communications (GTT +1.6%) got a $24 target and closed today at $18.31; it reports May 7 as well.
Thu, Apr. 9, 10:56 AM
- BofA/Merrill has downgraded cloud HR/payroll software vendor Paylocity (PCTY -5.9%) and cloud fleet management software vendor Fleetmatics (FLTX -3.2%) to Underperform, and cloud contact center software vendor Five9 (FIVN -4.7%) to Neutral. Rackspace (NYSE:RAX) and Citrix (NASDAQ:CTXS) have also been downgraded (to Neutral and Underperform, respectively), but are posting sub-1% declines.
- Shares of all 3 companies rallied in February in response to Q4 beats (I, II, III)
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
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
Tue, Feb. 17, 5:37 PM
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
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. 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, 4:28 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
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)
Oct. 7, 2014, 4:10 PM
- With the Nasdaq falling 1.6%, H-P (HPQ -4.5%) gave back nearly all of the gains it saw yesterday following its split announcement, in spite of largely favorable reactions from the sell-side and others.
- In addition to arguing H-P could be less efficient as two companies (both due to higher overhead and less negotiating power with suppliers), deal skeptics have argued a breakup doesn't address either half of the company's growth challenges.
- VC Roger McNamee: "HP has gone from having two boat anchors tied together, each trying to float in the water, to two separate boat anchors trying to float in the waters ... The only thing I’m certain about on this deal is that the executive compensation will be absolutely terrific."
- Meanwhile, Rackspace (RAX +1.8%) finished higher amid speculation the enterprise IT half of H-P could bid for the company. Rackspace called off its attempts to find a buyer last month, and re/code reported in August H-P is uninterested.
- Also: H-P has sold its 40% stake in UAE-based IT services firm Injazat Data Systems for an undisclosed sum. With H-P having reportedly attempted to sell its entire IT services unit (among other businesses) before deciding on a breakup, this could be a sign of things to come.
Sep. 17, 2014, 12:45 PM
Sep. 17, 2014, 11:47 AM
- 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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