The 2 Things Sellers Missed in Rackspace's Earnings Report

Anyone who needed a refresher in the dangers of owning high-growth stocks got one this week, when Rackspace Hosting (NYSE: RAX  ) reported fourth-quarter results that disappointed Wall Street. The stock fell 20% as a result.

Rackspace's "miss" featured plenty of impressive numbers. Overall, revenue improved 24.6%, while sales of cloud-hosted services rose 49.4%. Cash from operations grew 19.3%. All signs point to customers adopting Rackspace's most profitable services in greater volume, and that's despite intense competition from Amazon.com's (NASDAQ: AMZN  ) formidable Web Services unit, which some say is due to bring the e-commerce titan more than $4 billion in revenue this year alone.

Can Rackspace grow at the brisk pace Wall Street wants in such a tough market? Tim Beyers of Motley Fool Rule Breakers and Motley Fool Supernova talked with Rackspace CEO Lanham Napier following the earnings call, and cites two good reasons for Foolish investors to remain optimistic. Click the video below to learn more, and then leave a comment to let us know what you think.

While Rackspace lags, Amazon continues to soar. Can the rally continue? We'll tell you what's driving the company's growth, and fill you in on reasons to buy and reasons to sell Amazon in our new premium report. Our report also has you covered with a full year of free analyst updates to keep you informed as the company's story changes, so click here now to read more.


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  • Report this Comment On February 19, 2013, at 12:20 PM, Boscalis wrote:

    Rackspace RAX is victim to Mr. Market's bipolar disorder and what the company just experienced is probably what drove Michael Dell to try to take Dell private.

    We need a separate market for gamer-gambler trading products and methods and all serious businesses can stay on the traditional exchanges, opting out of the gamer-gambler market in which all of the risky trading vehicles are forever banished.

    Just as businesses must be able to rely on infrastructure where they do business, why can't small investors rely on rules that are predictable when doing the business of investing on rational bases?

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