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Published: Fri, August 12, 2016
Economy | By Melissa Porter

Rackspace Sells Cloud Sites Business to Liquid Web

Rackspace Sells Cloud Sites Business to Liquid Web

The company has experienced volume of 3.30M shares while on average the company has a capacity of trading 2.27M shares. Net income of Rackspace increased 5.8 percent to $36 million.

The company added $18.2 million to their free cash flow to boost free cash flow to $161.5 million. At the end of the second quarter of 2016, cash and cash equivalents were $544 million, and interest-bearing debt including capital lease obligations totaled $501 million.

After a bunch of anonymously-attributed reports heralded Rackpace's impending sale just before the weekend, all eyes were on the company's second-quarter earnings call with investors and analysts Monday.

Rumors have been flying for over a week that Rackspace was for sale, but today instead of the whole kit and kaboodle, the company announced it was selling its Cloud Sites web hosting unit to Liquid Web.

Liquid Web, a $90 million a year web hosting business, reports that the Cloud Sites platform will significantly augment its web hosting and cloud services business. With almost a quarter of Rackspace's revenue coming from the United Kingdom, the CEO said that he expected H2 revenues from the region to be "noticeably lighter". The stock traded in the price range of $28.40 - $29.46 for the last trading session. Analyst expected twelve month price target of $26.50. Jefferies Group's price target points to a potential downside of 24.98% from the company's previous close.

"Winning new AWS workloads from our dedicated hosting customers is a big part of our strategy", he said on the call, a transcript of which can be found here, as he admitted Rackspace's core business is slowing. (NYSE:RAX) now have an ABR of 2.41, derived from a total of 17 opinions. Current price places the company's stock 0.58% away from its 200-day simple moving average, 17.99%, away from the 50-day average and also 14.11% away from 20-day average.

The company's average revenue per managed server has risen by 7%, up to $1,513 per month. Its weekly and monthly volatility is 6.98%, 3.87% respectively. 1 analysts have suggested "Sell" for the company.

Iron Mountain Incorporated's (IRM) EPS growth ratio for the past five years was -4.70% while Sales growth for the past five years was 0.80%.

TheStreet Ratings team rates Rackspace Hosting as a Hold with a ratings score of C. The primary factors that have impacted the team's rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company now has a Return on Equity of 13.80% and Return on Investment of 8.50%.

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