Why Rackspace Shares Got Crushed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Web-hosting company Rackspace Hosting (NYSE: RAX  ) plunged 18% today after its quarterly results disappointed Wall Street.

So what: Rackspace's fourth-quarter profit managed to meet estimates, but a small miss on the top line -- revenue of $353 million versus the consensus of $355.4 million -- reinforces serious concerns over slowing demand. Management blamed the slowdown on its transition to the next-generation cloud, but given that it is the fifth straight quarter in which growth has slowed, investors just aren't buying it.

Now what: For 2013, management expects to spend between $375 million and $445 million in total capital expenditures. "We have ambitious plans; plans that involve making significant investments in new product and service development, fanatical support capability, branding, OpenStack community support and geographic expansion," said CEO A. Lanham Napier in a conference call. "[I]n the cloud era, we're taking a more proactive role in the development and technologies that we manage for our customers." With the stock now off about 25% from its 52-week high, betting on that bullishness might not be a bad idea.

Interested in more info on Rackspace? Add it to your watchlist.

2013 and beyond
The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2253631, ~/Articles/ArticleHandler.aspx, 8/25/2016 1:08:16 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,474.33 -7.15 -0.04%
S&P 500 2,176.57 1.13 0.05%
NASD 5,225.17 7.48 0.14%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/25/2016 12:52 PM
RAX $28.87 Up +1.32 +4.79%
Rackspace Hosting CAPS Rating: ***