The price target increase comes after the Wall Street Journal reported on Thursday that Rackspace was in advanced talks to be acquired by Apollo Group (APOL)for $3.5 billion, or $27 a share.
Oppenheimer believes the deal will be more in the $32 per share area.
The firm sees system integrators or large technology companies as possible candidates to acquire the company based off both its valuation and "poor market sentiment."
The firm also believes Rackspace has the ability to achieve an internal rate of return (IRR) of over 25%.
Rackspace Hosting is a Windcrest, TX-based leading provider of hosting services that support the delivery of websites, web-based IT systems and other forms of computing as a service for major businesses across a wide array of industries.
Shares of Rackspace Hosting were trading lower in early-afternoon trading on Monday.
Separately, 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.
TheStreet Ratings team rates Rackspace Hosting as a Hold with a ratings score of C. The primary factors that have impacted the team's rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks.
You can view the full analysis from the report here: RAX