Rackspace: Bull and Bear Cases

Forbes.com (Nov 24 2011)

1. Rackspace is a darling of Wall Street, benefitting from a hefty multiple because it is viewed as a pure Cloud play. The question for investors is whether Rackspace deserves a 50x multiple and whether its current march, up 50% over past twelve months, will continue. This articles lays out the Bull and Bear case for Rackspace. Bulls for Rackspace cite the company’s early entry into The Cloud trend and the company’s ability to create an attractive business model by staying ahead of trends. Today, 81% of Rackspace’s business is providing hosting services to Small and Medium Sized Businesses (SMBs) and 19% of Rackspace’s revenues are earned through providing Cloud services, standardized software offerings. While hosting is growing at 24% year over year growth, the higher-margin Cloud segment is growing at 89% over the same period last year. Rackspace holds the number two market share position in ... (Read Full Article)

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