Outperform/High Risk - Price 18.32 on Nov. 10
by Boenning & Scattergood

Rackspace provides managed-hosting and cloud-computing services; 3Q09 results beat our expectations across the board. Strong new customer revenue offset net customer upgrades...accelerating business trends will lead to accelerating revenue growth through 2010...allow[ing] margins to continue to expand. We're increasing our price target to 22 from 20. Market cap: $2.2 billion.

cloud computing

One of the pioneers in cloud computing

Market Outperform - Price 5 on Feb. 24
by JMP Securities

Cloud computing, [which spreads computing tasks across connected hardware and software, is]... likely to see investment in the downturn...To capitalize on this opportunity, Rackspace needs to simplify and rebrand its current cloud services, several the result of recent acquisitions. If Rackspace succeeds...it could add 3 cents and 12 cents to '09 and '10 non-GAAP EPS. For now, we maintain our '09 EPS estimate of 20 cents, versus consensus 17 cents, and a 2010 EPS estimate of 32 cents, versus consensus 25 cents. Our 9 target implies '09 EV/revenue multiple of 1.9 times, in line with the peer-group median. Market cap: $585 million.

Rackspace CEO: Watch Us Grow:
Rackspace CEO Lanham Napier tells reporter Robert Holmes that though his company is trading at half its August IPO price, new data centers overseas will help the Web hosting business grow.

Click here to watch the video.