On Sale: Buy This Cloud Computing Stock Cheaper Than JANA Partners

JANA Partners has been an aggressive activist hedge fund over the past few years, going after the likes of ConAgra, Walgreen and most recently Qualcomm, among many others. One stock that JANA has not gone "activist" on (yet), but has an ever increasing stake in is Rackspace (NYSE: RAX).

According to StreetInsider.com's Hedge Fund Insider data, JANA first got involved in Rackspace in the third quarter of 2014 with a new 7,004,977 share stake and filed a 13G (passive) showing an 8,001,600 shares stake as of the end of 2014. After cutting the stake by 2,004,300 shares in Q1 2015, JANA nearly doubled its stake in the second quarter of 2015, adding over 5,000,000 shares and brining its stake to an even 11,000,000 shares.

Shares of Rackspace started Q3 2014 at around $34 and ended 2014 around $47, the timeframe JANA first got involved. Since topping out around $55 in April 2015, it has been all down hill for Rackspace. Shares started the second quarter 2105 at $54 and ended around $34. Assuming JANA accumulated most of its position around the lows, it would be safe to assume that JANA has a cost basis in the mid-to-high $30s. Rackspace's current price is $30.62, giving you an opportunity to buy the stock for cheaper than JANA.

Should you take it?

Following lackluster second quarter results and guidance on August 10th, analyst Colby Synesael at Cowen said the bar has been reset and he sees an acceleration in the 2nd-half.

Meanwhile, with earnings, Rackspace announced a new $1 billion buyback, its most aggressive program yet. The company intends to complete at least $500 million of the new buyback within six to nine months, subject to market conditions and arrangement of financing. The buyback will not only bolster EPS it should bolster the stock as well.

With potential activism from JANA, a trough in fundaments and acceleration in the second half, and an aggressive buyback plan, Rackspace's stock may finally get itself out of the doghouse.

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