UBS Cuts Price Target on Rackspace (RAX) Following 2Q Results and Guidance

UBS reiterated a Neutral rating on Rackspace (NYSE: RAX), and cut the price target to $36.50 (from $43.00), following the company's 2Q15 earnings report and guidance. Analyst Steven Milunovich said that the 2Q results came in as expected, but revenue and EBITDA margin guidance fell for the second half. The company has more than doubled its planned buyback from $500mn to $1.2bn total.

Milunovich commented, "Rackspace's 2Q came in as expected, but revenue and EBITDA margin guidance fell for the second half. The stock's decline suggested that investors didn't believe management's acceleration story anyway. Consequently, the incremental news sent the stock up a few points after hours: enterprise business is improving and the company has more than doubled its planned buyback from $500mn to $1.2bn total. Our new non-GAAP EPS estimates are $0.88 this year and $1.20 next on 15% top-line growth and lower share count. We see hope for the company but remain at Neutral."

For an analyst ratings summary and ratings history on Rackspace click here. For more ratings news on Rackspace click here.

Shares of Rackspace closed at $31.73 yesterday.

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