Rackspace Shares Climb After 'Outperform' Rating

NEW YORK (AP) — Shares of Rackspace Hosting Inc. jumped Wednesday after Credit Suisse began coverage of the stock with an "Outperform" rating.

The San Antonio-based company saw shares climb 60 cents, or 4.8 percent, to $12.97 in afternoon trading. The stock has ranged from $4 to $16.23 over the past year.

In a note to investors, Credit Suisse analyst Bryan McGrath called Rackspace a "an early leader in the emerging market of cloud computing," in which Rackspace provides companies with the use of its computer servers for a fee.

"The same basic economic forces that drove businesses to switch from generating their own electricity to purchasing power as needed from a local utility" are now driving the outsourcing of computer power, he wrote.

McGrath noted the Rackspace's revenue climbed nearly 47 percent in 2008. He expects growth of roughly 16 percent in 2009 and 2010.

Last month, the company reported a 67 percent improvement in second-quarter profit, matching Wall Street expectations.

McGrath assigned Rackspace shares an $18 price target.