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Technology

Why Rackspace Earnings Prompted So Many Analyst Target Cuts

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By Chris Lange Updated Published
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Why Rackspace Earnings Prompted So Many Analyst Target Cuts

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Rackspace Hosting Inc. (NYSE: RAX) reported its fourth-quarter financial results this past week. At first investors did not like or even receive these earnings well, but the following day the stock bounced off a 52-week low and ended the week higher than it had started. However after the fact, analysts cut their ratings and price targets.

The company had $0.24 in earnings per share (EPS) on $522.8 million in revenue. That compared to consensus estimates from Thomson Reuters of $0.23 in EPS on revenue of $521.39 million. The same period from the previous year had EPS of $0.26 and $472.42 million in revenue.

In terms of guidance, the company expects revenue to be in the range of $517 million and $521 million for the first quarter, and to be $2.08 billion to $2.16 billion in revenue for the 2016 full year. Consensus estimates call for $530.68 million in revenue in the first quarter and $2.21 billion in revenue for the full year.
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After the earnings report a few analysts weighed in on Rackspace:

  • Cowen has an Outperform rating and lowered its price target to $36 from $52.
  • JPMorgan has a Neutral rating and lowered its price target to $22 from $34.
  • Pacific Crest lowered its rating to Sector Weight.
  • Barclays downgraded to an Equal Weight rating from Overweight and lowered its price target to $21 from $35.
  • Credit Suisse downgraded to a Neutral rating from Outperform and lowered its price target from $50 to $22.
  • Goldman Sachs has a Neutral rating and lowered its price target to $21 from $24.
  • RBC has an Outperform rating and lowered its price target to $26 from $31.
  • UBS has a Neutral rating and lowered its price target to $19 from $28.
  • Jefferies has a Hold rating and lowered its price target from $33 to $21.
  • Raymond James has a Strong Buy rating and lowered its price target to $28 from $48.
  • Stifel downgraded it to Hold from Buy.
  • Oppenheimer has an Outperform rating and lowered its price target to $30 from $43.

Shares of Rackspace closed trading at $20.03 on Friday, with a consensus analyst price target of $27.06 and a 52-week trading range of $15.05 to $56.20.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.

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