The downgrade comes after private equity firm Apollo Global Management said it would take the company private in a $4.3 billion deal.
Wells Fargo believes the transaction makes sense, the Fly noted.
Under the terms of the deal, Rackspace shareholders will receive $32 per share in cash. This represents a 38% premium to the stock's closing price on August 3, when the Wall Street Journal first reported that the companies were approaching an agreement.
The San Antonio, TX-based company operates in the managed cloud segment of the business information technology market.
Shares of Rackspace were inching lower in mid-morning trading on Monday.
Separately, TheStreet Ratings Team has a "Hold" rating with a score of C on the stock.
The primary factors that have impacted the rating are mixed. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth.
But the team also finds that the stock has experienced relatively poor performance when compared with the S&P 500 during the past year.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
You can view the full analysis from the report here: RAX