Morningstar Rating

Stock Research and Analysis

by Rick Summer, CFA, CPA

Bulls Say

Rackspace has a customer base of managed hosting customers that are ripe targets for purchasing cloud computing services.
The success of Rackspace's high-touch support organization is validated by its low customer churn rate.
Rackspace is using technology from NASA to lead development of an open-source platform called OpenStack, which is becoming an emerging standard for cloud computing services. Read more 

Bears Say

The market for cloud computing is nascent. The growth prospects for this industry is highly uncertain, heightening the valuation risk for these companies.
Rackspace's business is capital intensive, and small changes in pricing may have larger effects on the company's returns on capital.
Basic cloud computing services will become increasingly price sensitive as the number of alternatives for purchasing server capacity and service become greater. Read more 

Management

CEO Lanham Napier has been with Rackspace since 2000, having served as CFO and president prior to taking the lead role in 2006. The company's management team has been mostly stable, and we believe it is motivated to earn excess returns on capital and   Read more 

Profile

Rackspace is a managed hosting and cloud computing provider. Cloud computing is the faster-growing market segment and recently reached more than 27% of overall revenues.  Read more 

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