The Lighter Side Of The Cloud – New CEO
The Lighter Side Of The Cloud – Company Strategy
The Lighter Side Of The Cloud – Location?
The Lighter Side Of The Cloud – Whoops!
What Ails The Rackspace Stock?

What Ails The Rackspace Stock?

What Ails The Rackspace Stock?

Rackspace US, Inc. (NYSE: RAX), a IT hosting company based in San Antonio, Texas, has long been a darling of the cloud computing industry. Established in 1998 and gone public in 2008, Rackspace is one of the early success stories of the cloud computing revolution. However, its recent stock performance, in spite of revenue increases, has given investors cause for worry.

Here’s an analysis of the situation.

The following table from stock analysis website The Street brings into focus the relative non-performance of Rackspace in stock ROI as compared to other parameters. Like many tech companies, Rackspace does not pay dividends and hence, its low score on that factor is not of importance. Even Google and Microsoft would score poorly on that measure.

 

 Source: The Street (http://www.thestreet.com/r/ratings/reports/detail/RAX.html)

The Rackspace stock has lost 25% of its value in the last two months. While this may offer a great buying opportunity, as indeed many financial advisors believe, a comparison with peer Red Hat does raise some interesting issues. For one, on comparable revenues, Red Hat delivered 50% more profits than Rackspace. The inevitable question on Rackspace’s low operating margins follows.

Secondly, even with the price decline, Rackspace still trades at a considerable premium in terms of price-to-earnings ratio as compared to its peer group. This brings to mind the question whether the price correction was actually justified.

Source: The Street (http://www.thestreet.com/r/ratings/reports/peergroup/RAX.html)

There’s another cause for concern as pointed out by financial analyst Will Ashworth. He says that Rackspace is heavily depending on OpenStack – the open-source cloud computing project launched by Rackspace and NASA – to drive future growth (See: Archives: Open Stack). However, too many companies may be involved in OpenStack’s development, leading to the proverbial “too many cooks spoil the broth syndrome”. On the other hand, competing cloud computing platform Eucalyptus is already up and running. With the important first-mover advantage, Eucalyptus may very well steal a march on OpenStack.

In conclusion, while Rackspace still seems to be a good bet (it’s still “racking” up impressive revenue growth numbers), its management has its work cut out to ensure its top rating in the cloud computing stakes.

By Sourya Biswas

sourya

Sourya Biswas is a former risk analyst who has worked with several financial organizations of international repute, besides being a freelance journalist with several articles published online. After 6 years of work, he has decided to pursue further studies at the University of Notre Dame, where he has completed his MBA. He holds a Bachelors in Engineering from the Indian Institute of Information Technology. He is also a member of high-IQ organizations Mensa and Triple Nine Society and has been a prolific writer to CloudTweaks over the years... http://www.cloudtweaks.com/author/sourya/

One Response to What Ails The Rackspace Stock?

  1. I was a Rackspace customer for 6 years, paying 3200.00 per month for 3 dedicated servers. I finally came to my senses and switched to 8×8 by for almost half the price and my service is GREAT. I will I did it sooner! Down with rackspace price gouging!

FREE! POPULAR RESEARCH TOOLS

Popular Archives

The Growth Of Rampant Digital Diseases

The Growth Of Rampant Digital Diseases

Rampant Digital Diseases Keeping ‘Rombertik’ at Bay – The New Malware that Destroys Hard-Drives A new form of malware is still on the loose, and this one takes malicious to a whole new level. Nicknamed ‘Rombertik’ by Cisco Systems, the malware attempts to infiltrate the victim’s browser to procure confidential information; fairly standard operating procedure…

The Cloud In 2015: Eight Trends To Look For

The Cloud In 2015: Eight Trends To Look For

The Cloud In 2015 For organizations of all sizes, in 2014 the cloud emerged as a critical part of the default consideration set when implementing any new application – in large part due to the cloud’s proven ability to handle data storage and processing demands in an elastic manner, improved verifiable standards around data security and…

Recent

Cloud Infographic – Top Vulnerable Applications

Cloud Infographic – Top Vulnerable Applications

Top Vulnerable Applications  As you use the Internet on a daily basis, you probably come across cyber security topics, but rarely glance at them twice. After all, cyber security threats don’t concern you, right? Well, that’s not exactly true. Cyber attacks are more widespread than you can imagine and they may be targeting your devices as…

The Lighter Side Of The Cloud – Whatever Happened To Alone Time?

The Lighter Side Of The Cloud – Whatever Happened To Alone Time?

By David Fletcher Are you looking to supercharge your Newsletter, Powerpoint presentation, Social media campaign or Website? Our universally recognized tech related comics can help you. Contact us for information on our commercial licensing rates.  About Latest Posts souryaSourya Biswas is a former risk analyst who has worked with several financial organizations of international repute,…

MOST RECENT - Posted by
New Trends In Cloud Based Education

New Trends In Cloud Based Education

Cloud Based Education With technological progress accelerating and users’ computer experience becoming richer and increasingly complex, the future developments in education technology is very exciting. Students are now able to attend demonstration sessions on how to handle technology through remote laboratories using advanced applications in a truly interactive environment. One of these exciting areas is in telemedicine.…

The Many Hats Of Today’s IT Managers

The Many Hats Of Today’s IT Managers

The Many Hats of IT Managers In years past, the IT department of most large organizations was much like a version of Middle Earth: a mysterious nether world where people who seemed infinitely smarter than the rest of us bustled around, speaking and typing languages that appeared indecipherable, yet, which made our world work. They…

Selling Your Business To Your Employees

Selling Your Business To Your Employees

Mobility For Your Employees It may seem a radical notion, the idea of selling your business to the people who work for you, but this is the era in which we now work. Employees of all levels are all incredibly aware of their options when it comes to mobility and employability. This doesn’t mean that…

Technology Sponsors

hp Logo CityCloud-PoweredByOpenstack-Bluesquare_logo_100x100-01
cisco_logo_100x100 vmware citrix100
Site 24x7 200px-KPMG
Advertising ROI Plans

Established in 2009

CloudTweaks is recognized as one of the leading influencers in cloud computing, big data and internet of things (IoT) information. Our goal is to continue to build our growing information portal, by providing the best in-depth articles, interviews, event listings, whitepapers, infographics and much more.

CloudTweaks Comic Library

Advertising