February 13, 2013
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.