Credit Suisse Lifts Numbers On Rackspace (RAX) Following Q1 Results

Credit Suisse raised estiamtes and their price target on Outperform-rated Rackspace (NYSE: RAX) following results after the close that beat on the top-line but missed on the bottom-line.

The firm raised 2011 revenues to $1001m from $983. EPS goes from $0.71 to $0.63 (GAAP EPS $0.48 to $0.40. The firm also adjusted 2012/2013 EPS estimates to $0.89/$1.29 from $0.96/$1.28 respectively. The firm raised their price target from $42 to $50.

"We believe Rackspace's growth acceleration in 1q (up 29% y/y versus 27% y/y in 4Q) highlights strong execution as well as increased demand, which we believe will sustain growth in the high 20s for the next few years," analyst G. Dunham said. "The strength was driven by acceleration in cloud revenues (up 93% y/y versus 83% growth in 4q) due to recent product launches. Strong enterprise business fueled the best install base growth since June 2008, lifting managed hosting growth to 21% y/y vs 20% in 4Q. While bears will point to flat EBITDA margins for 2011, we believe investment is warranted and see Rackspace's investment profile becoming more front-end loaded as cloud business increases in mix. We see significant leverage in the model and are still raising EBITDA forecasts for 2011 to $337m from $334m."

For more ratings news on Rackspace click here and for the rating history of Rackspace click here.

Shares of Rackspace closed at $43.27 yesterday.

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