Morgan Joseph Starts Rackspace (RAX) at Hold; Rack ‘Em Up

Morgan Joseph initiates coverage on Rackspace (NYSE: RAX) with a Hold.

Morgan analyst says, "In our opinion, the company, which offers cloud hosting and managed hosting solutions, is fairly valued despite its attractive fundamentals. We believe Rackspace has benefitted from the buyout premiums offered to competitors such as Savvis and Terremark, which were recently acquired for approximately 10x and 13x their respective consensus CY12E EV/EBITDA estimates, including debt. Similar to our thesis on Digital Realty, we foresee significant opportunities for Rackspace in the data center services space based on a rapid increase in the adoption of cloud-based services, along with rising Internet traffic. We believe that as cloud-computing gains more traction among enterprises and governments, the potential for revenue growth will rise. However, we also believe that Rackspace’s share price, at current levels, fully reflects available revenue and adjusted EBITDA growth potential."

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

Shares of Rackspace closed at $42.39 yesterday.

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• ICICI Securities Resumes Oberoi Realty Ltd (OBER:IN) at Buy (1)
• Oppenheimer Starts Carriage Services (CSV) at Outperform
• BofA Securities Resumes American Eagle Outfitters (AEO) at Underperform