Rackspace Posts Q2 Revenue Miss, ‘Lacks Catalysts’ In Cloud Sector
Rackspace Hosting ( RAX ) stock fell after the cloud computing service provider late Monday reported Q1 revenue that missed estimates and forecast current-quarter sales below views. Shares in Rackspace had fallen 2.5% in early trading on the stock market today , but by early afternoon, the stock was up 2.6% to above 23. “The lack of near-term catalysts for growth, in a cloud sector marked by growth, will likely result in continued weakness in the shares despite an aggressive buyback program,” Michael Bowen, an analyst at Pacific Crest Securities, said in a report. Rackspace repurchased $68 million of its own stock in Q1. It plans to buy back at least $65 million in the current quarter. After that, it would have about $500 million remaining in a share repurchasing program. Rackspace has struggled in competing with the much larger Amazon Web Services, the cloud computing arm of Amazon.com ( AMZN ), as well as Microsoft ‘s ( MSFT ) Azure service and Alphabet ‘s ( GOOGL ) Google in the IaaS (infrastructure-as-a-service) market. Amazon’s AWS is the biggest provider of IaaS, in which client companies rent computers and data storage via the Internet cloud. Rackspace has been shifting to providing service for public clouds aside from its own, including AWS and Microsoft’s Azure cloud. Rackspace said Q1 earnings rose 21% to 34 cents a share, with revenue up 8% to $518 million. Analysts had modeled for profit of 22 cents and revenue of $519 million. In the current quarter, Rackspace forecast revenue of $521.5 million at the midpoint of its guidance vs. consensus estimates of $523.9 million. Rackspace stock has plunged 58% from 12 months ago. Shares are down about 13% in 2016 so far. Rackspace has an IBD Composite Rating of 53 out of a possible 99.