Rackspace Hosting (f/k/a RAX)

[ciciagt]

Rackspace: Goldman Cuts Rating To Neutral On Valuation Basis

Goldman Sachs analyst Scott Goldman this morning cut his rating on Rackspace to Neutral from Buy on a valuation basis. He has a $57 target on the stock, which closed yesterday at $57.80.

“We remain positive on the opportunity in cloud computing and believe RAX is well positioned among peers, but we are disciplined on price given current valuation,” he writes in a research note. The stock is up 57.5% over the last 12 months, he points out.

“The long-term thesis for Rackspace remains intact as the company continues executing on its plan to drive cloud usage. With adoption still low, initiatives like OpenStack and Managed Cloud will broaden RAX’s addressable market to areas that are less susceptible to price competition from larger technology competitors,” he writes.

On the other hand, he contends that ” investors are less likely to be rewarded by further upside to Street numbers, as the gap between our estimates and consensus has narrowed meaningfully over the past two quarters and we believe investor expectations could be even more aggressive.”

Rackspace this morning is down $2.10, or 3.6%, to $55.70.

http://www.forbes.com/sites/ericsavitz/2012/03/22/rackspace-goldman-cuts-rating-to-neutral-on-valuation-basis/?partner=yahootix