NEW YORK (TheStreet) -- Shares in Rackspace (RAX) soared Tuesday, up 13.21% at the close following the company's third-quarter earnings beat Monday. After several quarters of mixed results, San Antonio, Tex.-based Rackspace delivered third-quarter earnings and revenue that grew 64% and 18% year over year, respectively. Plus, Rackspace announced a $500 million stock repurchase program.
Rackspace has given Wall Street just the kind of growth investors have bet on. That's all well and good, but it doesn't mean Rackspace -- which competes with Amazon (AMZN) and IBM (IBM) in cloud computing and web hosting services -- is any less risky than before.
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The chart below, courtesy of Google Finance, shows how Wall Street has been unable to make up its mind about Rackspace's direction and to what extent it can live up to high expectations.
To say that these shares have been volatile would be an understatement. At one point they were down 24% in the trailing twelve months through Monday's close of $37.32. Each peak is immediately followed by valley.
So with the stock now generating yet another peak Tuesday with a better-than-13% jump, it's tough to ignore that a corresponding double-digit decline is likely lurking around the corner.
To top it off, at a trailing price-to-earnings ratio of 71, these shares are now even more expensive then they were before. That trailing P/E is almost four times the average P/E of companies (21) in the S&P 500 (SPY) , according to CNN Money.
And even where there is optimism, there are also reason for worry.