SAN FRANCISCO ( TheStreet) – Rackspace Hosting ( RAX) surged on Tuesday following higher-than-expected third-quarter earnings which led analysts to raise the 12-month price target on the San Antonio-based cloud company. British telecom Vodafone Group ( VOD) also gained on an following its earnings report, while Zynga ( ZNGA) jumped an analyst upgrade.
Rackspace Hosting soared 13% to close at $42.25 after posting earnings of 18 cents a share on revenue of $459.8 million, an 18% increase from the same period a year ago year. Here's a closer look at Rackspace earnings, based on a transcript of its earnings call with analysts.
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That performance beat Wall Street's expectations of earnings of 16 cents a share on revenue of $458.4 million, according to analysts surveyed by Thomson Reuters. And in the fourth quarter, the cloud company expects to generate between $469 million to $477 million in revenue, which is higher than analysts expectations of $476.5 million. Rackspace investors like Dan Loeb stand to benefit greatly from the bounce in the stock.
Rackspace's strong earnings come at a time when corporate America is increasingly turning to cloud solutions, where data can be stored in a sea of computers operated by third parties like Rackspace, rather than within the company's own set of computers.
In addition to the upside earnings surprise, Rackspace also received a boost from Credit Suisse, which increased its price target to $45 from $40.
Vodafone Group ended the regular session up 5.4% to $34.80.
The British telecom company reported its fiscal second quarter earnings of 0.05 cents on revenue of $33.1 billion before the markets opened Tuesday. Analysts were expecting the company to generate earnings of 0.03 cents and a similar level of revenue.
Overall, the telecom carrier said its position across Europe is improving and it has been able to lower its revenue declines sequentially, as well as compared with year ago figures. In the second quarter, revenue fell 1.5% compared to a year ago, while in the previous quarter it was a 4.2% drop over year ago figures. Here is a copy of the earnings call transcript for a closer look into Vodafone's performance.
Zynga soared 10.9% to close at $2.75.
The online social game maker received a substantial boost after Jefferies upgraded the stock to a "buy" from a "hold." The investment bank gave the San Francisco-based company a price target of $4.50.
Driving the bullish outlook is a sense that Zynga will benefit from its new mobile games next year. The maker of the popular Words with Friends and FarmVille is betting big on mobile. The company this year generated more bookings from its mobile games than its Web versions.
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At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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 increase in net income, robust revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity."
You can view the full analysis from the report here: RAX Ratings Report