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Rackspace Stock Up on Report Amazon Eyeing Investment

Shares of Rackspace, which helps companies port their data to Amazon Web Services, are up on a report that AMZN might buy in.
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Rackspace Technology  (RXT) - Get Rackspace Technology, Inc. Report shares are higher as  (AMZN) - Get, Inc. Report reportedly is in early-stage negotiations to invest in the cloud-services provider. 

Sources told Reuters that Amazon, the online retailing and tech giant, would buy a minority share of Rackspace, which helps companies port their data to Amazon Web Services, the retailer’s cloud platform.

Rackspace also helps companies move their data to Amazon’s competitors: Alphabet’s  (GOOGL) - Get Alphabet Inc. Class A Report Google Cloud, Microsoft’s  (MSFT) - Get Microsoft Corporation Report Azure and VMware  (VMW) - Get VMware, Inc. Class A Report

Rackspace went public Aug. 5. It’s majority-owned by private equity titan Apollo Global Management  (APO) - Get Apollo Global Management Inc. Class A Report, according to Reuters. 

If a deal does transpire, it could take one or two months, sources told Reuters.

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Morningstar analyst R.J. Hottovy gave Amazon a glowing review after its earnings report last month.

“Amazon's disruption of the retail industry is well documented, but it continues to find ways to evolve,” he wrote in a commentary.

“Its operational efficiency, network effect, and a brand intangible asset give its marketplaces sustainable competitive advantages that few, if any, traditional retailers can match. The combination of competitive pricing, unparalleled logistics capabilities and speed, and high-level customer service makes Amazon an increasingly vital distribution channel for consumer brands.”

That’s especially true during the coronavirus pandemic, Hottovy said. “Even with more retailers looking to expand online, we believe Amazon will maintain its consumer proposition through expedited Prime shipping, an expanding digital content library, and new customer services.”

He puts fair value for Amazon stock at $3,500. The shares recently traded at $3,170.02, up 0.7%. They are 72% higher year to date.

Rackspace at last check traded at $19, up 14%, and has risen 14% since its IPO. Apollo Global shares were 1.8% higher at $48.23.