Rackspace (RAX) shares have rebounded 50% from the July 25th low of $40.57, hitting a new high this morning at $61.
Rackspace shares rallied 8% yesterday after the company reported better-than-expected Q2 results, with revenue up 29% year over year to $319 million, vs. the consensus of $318.1 million. Public cloud revenue jumped 69% to $73 million. EBITDA margin improved 170 basis points sequentially to 35.1%.
Rackspace added more than 10,000 customers (up from 8,300 adds in Q1) thanks to an uptick in enterprise demand. Monthly average installed base growth rebounded to 1% from 0.7% in Q1. Average monthly revenue per server increased to $1,270 from $1,238 in Q1, the 12th quarterly increase in a row.
Rackspace is on track with its platform transition to OpenStack. The servers have been launched. Monitoring, backup and block storage will be added in Q3, with networking early in Q4. Rackspace won't begin to see the real positive effects of the move to OpenStack until sometime in Q4, so some analysts are cautious on Q3 because of potential transition issues. But both Jefferies and Pacific Crest upgraded Rackspace shares following the Q2 report.
Re: Great company - too expensive
tokyogai
5/14/2012 3:17:36 PM
I am also still a fan- just not buying right now.
Re: Great company - too expensive
TelecomFreq
5/14/2012 2:13:09 PM
I have always seen Rackspace as an interesting company Hosting is a pretty cut throught business to be in. But Rackspace has found a great nitch with the services they offer. I have always seen the stock as a bit to pricey for me and compaired to other companies I see more growth in, but I am still a big fan of the company.
Re: Great company - too expensive
tokyogai
5/14/2012 8:33:59 AM
I agree. It is a good comapny, but probably overvalued, at least as measured by the P/E.
I agree this stock has always been too rich for my blood as well.
The 2-year price chart for RAX is a wonderful sweep upward from sub-$20 to $50+. And unlike Groupon, they have a value proposition that contributes to making money long-term.
But everybody already loves them, so the P/E is just too rich for me to buy -
| Trailing P/E (ttm, intraday): |
85.40 |
| Forward P/E (fye Dec 31, 2013): |
45.97 |
Source - Yahoo Finance
Rackspace may have problems supporting large customers
ProfR
5/11/2012 11:10:13 AM
Rackspace is well positioned in the cloud space especially around smaller customers. Not sure their model works as well for larger customers. Larger customers may need more hand holding and more direct sales/support models and may gravitate towards leaders like Amazon or towards their hosting/network providers for this type of service.
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