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Can You Still Trust Rackspace Hosting, Inc.?

By Tim Beyers – Feb 25, 2014 at 10:00PM

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New CEO Graham Weston has been in this position before, yet you needn’t rush into this stock.

Don't be surprised if Rackspace Hosting (RAX) continues to suffer short-term losses, Fool contributor Tim Beyers says in the following video.

The stock has already taken a beating, down more than 36% over the past year as the S&P 500 has rallied better than 22%. Meanwhile, CEO Lanham Napier's sudden resignation has raised questions about Rackspace's strategy.

Interim chief Graham Weston doesn't lack for confidence. In the conference call following Rackspace's Q4 earnings report, he said the opportunity today is bigger than it was when he got involved with the company 15 years ago. Tim says he's referring to the variety of customers who are putting at least some business operations online but that don't have the expertise to create a cohesive, high-performance hybrid environment.

Specifically, he's referring to the growing number of businesses that have equipment from a variety a different vendors that needs mixing with resources located in the cloud. Providing the expertise to manage that sort of complexity could set Rackspace apart from Amazon.com, VMware, and other would-be disruptors, Tim says.

Weston also has plenty to lose if he's wrong. According to S&P Capital IQ, he still owns more than 13% of Rackspace's shares outstanding -- more than any other individual stockholder.

Now it's your turn to weigh in. What do you think of Rackspace's strategy? Do you trust Weston and his team? Please watch the video to get Tim's full take and then leave a comment to let us know where you stand and whether you would buy, sell, or short Rackspace stock at current prices.

Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Rackspace Hosting at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool recommends Rackspace Hosting. It recommends and owns shares of Amazon.com and VMware. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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