Why Rackspace (RAX) Is Gaining After-Hours Today

NEW YORK (TheStreet) --Rackspace (RAX) is gaining 3.5% to $31.75 in after-hour trading Thursday following reports that it hired Morgan Stanley (MS) to evaluate options.

According to Bloomberg Rackspace hired Morgan Stanley to explore strategic options, possibly including working with larger technology companies. The bank will reportedly help Rackspace expand its business after competitors Amazon.com (AMZN) and Google (GOOG) cut prices faster than expected.

"Our board decided to hire Morgan Stanley to evaluate the inbound strategic proposals, and to explore any other alternatives which could advance Rackspace's long-term strategy," Rackspace said in a statement to Bloomberg.

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TheStreet Ratings team rates RACKSPACE HOSTING INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate RACKSPACE HOSTING INC (RAX) a HOLD. The primary factors that have impacted our 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. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."

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