RackSpace Releases Quarterly Numbers – The Good, The Bad & The Ugly

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RackSpace, leader of managed cloud services, was in the midst of a turn around over the past year. RackSpace was once reported to be on the selling block, with big players such as Microsoft, SalesForce and others rumored to be interested in buying out the company. RackSpace decided against being acquired and doubled down its efforts to provide “Fanatical” support and service to its clients.
Depending on how your read the latest financial news regarding the quarterly numbers of RackSpace, the news can be broken down into three categories: The good, the bad and the ugly.
The Good News for RackSpace
In May of 2014, RackSpace’s stock price was trading in the sub $27 a share range. As of last week, RackSpace’s stock price had nearly doubled, trading in the $54 a share range. In the latest quarterly earnings report, RackSpace analysts mention that the company saw a 12% rise in profit
The Bad News for RackSpace
In a piece written by Spencer Jakab of the WSJ, his headline proclaims that RackSpace is “Painfully Stretched.” His sub headline says that RackSpace continues to battle “The same old woes.” After financially analyzing RackSpace in his piece, Jakab concludes, “Hoping the sun’ll come out tomorrow is nice but isn’t a strategy.”
The Ugly News for RackSpace
Although RackSpace has seen a surge in its stock price over the past year, much of the progress was wiped out in one day after the quarterly earnings were released. In April 2015, RackSpace’s stock price was in the $54 range.
After the latest quarterly earnings call, stock prices plunged to the $46 range. Bill Stoller at Benzinga writes,“The forecasted rate of growth, and how that growth will have to be achieved, could be what spooked investors given the competitive dynamics of this space.”