Analysts Say Buy the Dip in Rackspace (RAX); Growth Will Continue, M&A Still On The Table

While traders are selling shares of Rackspace (NYSE: RAX) hand-over-fist Tuesday afternoon amid a Q1 miss Monday evening, several analysts view the 12 percent decline in the stock as a buying opportunity.

Stifel Nicolaus' Todd Weller said he would take advantage of the downside, arguing sales growth remains strong. The analyst said the disappointing EBITDA performance was the result of increased investment which "represents more of a positive sign with respect to future growth." Weller reiterated a Buy rating but reduced his price target on Rackspace shares very modestly from $66 to $65.

Timothy Horan of Oppenheimer believes the company is positioned to eventually become the dominant services company for cloud computing. The analyst pointed to Rackspace as an attractive takeover candidate for telecom companies which need to grow their cloud offerings.

Late Monday, Jefferies' Thomas Seitz said volatility in the stock creates a chance for longer-term investors to get involved. He warned that near-term volatility may continue as shorter-term investors protect their gains from this year.

To track all the analyst calls on shares of Rackspace, stay tuned to our Analyst Ratings page.

---

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

---

You May Also Be Interested In

• Walmart (WMT) PT Lowered to $130 at UBS on Investment Narrative's Competing Dynamics
• Is the global equity rally broadening? UBS weighs in
• Advance Auto Parts (AAP) PT Lowered to $43 at Truist Securities