Cloud services provider Rackspace Technology (NASDAQ:RXT) returned to the public markets earlier this month, but it hasn't been a popular stock in the weeks since, trading well below its $21 IPO price.
Today, that began to change, as a whole slew of investment bankers who helped to bring the stock public saw their "quiet periods" expire, and began talking up the stock this morning. Shares of Rackspace are responding to all the happy talk, rising 8.8% through 10:15 a.m. EDT.
A majority of the 14 investment banks that combined to bring Rackspace public have already weighed in, and with uniformly positive ratings ("buy," "outperform," or "overweight," depending on their preferred language), and price targets mostly in the mid-to-high $20 range. BMO Capital, for example, is predicting that core revenue at Rackspace will grow 10% over the next two years. Citigroup predicts "above-market rates" of growth. Credit Suisse says corporate spending on the cloud will double over the next three years, and believes Rackspace will grab a good part of that business.
Most optimistic of all is Goldman Sachs. The biggest underwriter of the IPO, selling more than 6.9 million shares of Rackspace, Goldman rushed out an initiation on Rackspace last night arguing that the "COVID-19 pandemic has accelerated cloud transformation ... in a world of cloud complexity and cost control" according to TheFly.com, and predicting the now $21 stock will more than double to $44 over the next 12 months.
All the cheering is naturally driving Rackspace shares higher today -- and the cheering isn't over yet. While all the biggest names have now chimed in, there are still five more investment banks that took part in the IPO but which have yet to initiate coverage of Rackspace. In the weeks ahead, look to hear from HSBC Holdings, LionTree, Siebert Williams, Drexel Hamilton, and Apollo Global Securities.
I expect they'll all have positive things to say, and -- whether their comments are justified or not -- that Rackspace shares will benefit from the positive commentary.