Canaccord Genuity Comments on Rackspace (RAX) Following Q2 Results

Canaccord Genuity maintained a Hold rating on Rackspace (NYSE: RAX) with a price target of $35. Comments follow Q2 results. Importantly, management provided no update on the strategic review process, noted analyst Greg Miller.

"Rackspace reported Q2/14 results after the close last night that although were slightly better than our estimates, were still below Street expectations for EBITDA. Q3/14 revenue guidance was ahead of expectations with slightly disappointing EBITDA margin guidance. Most importantly, management provided no update on the strategic review process that seemed to have some hoping of an imminent sale," said Miller.

"It was disclosed that the strategic review process would continue. Given the report was better than our expectations it is clear the company continues to function well as it reviews its alternatives. However, we continue to fear that the longer the process takes, the higher the risk that highly sought after key employees become targets for others looking to participate in this high growth subsector. If so, the revenue growth rate of the company could slow meaningfully," he added.

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 $31.31 yesterday.

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