Wells Fargo Downgrades Rackspace (RAX) to Market Perform

April 2, 2013 7:18 AM EDT
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Wells Fargo downgraded Rackspace (NYSE: RAX) from Outperform to Market Perform and cut its valuation range from $70-$73 to $47-$52 saying this transition period will limit upside.

"While we continue to believe that RAX is a great company with excellent management and strong long term growth prospects, we think the company is in a transition period which could limit stock appreciation from current levels for the next 6-12 months," analyst Gray Powell said. "As we highlighted last week, we believe cloud computing is to some extent cannibalizing managed hosting growth. In addition, we believe that the impact of recently reduced bandwidth prices will pressure RAX revenues to a greater degree than we originally expected."

The firm cut 2013/2014 EBITDA estimates to $546MM/$670MM from $558MM/
$705MM previously. 2013 EPS estimates go from $3.88 to $3.80 and 2014 EPS estimates go from $4.87 to $4.63.

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 $49.47 yesterday.

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