AOL Spikes on Verizon Merger Deal, Intel Falls on Questionable Forecast

NEW YORK (TheStreet) -- AOL (AOL) spiked Tuesday after Verizon Communications (VZ) announced it would snap up the Internet pioneer for $4.4 billion in cash. Intel (INTC) edged lower after an analyst called its full-year forecast a little too high. Rackspace Hosting (RAX) tanked after posting weak earnings and forecast, as well as receiving a downgrade.

AOL surged 18.6% to close at $50.52. Verizon fell 0.36% to $49.62 for the day.

The Internet pioneer managed to race ahead despite a downgrade by Cantor Fitzgerald to sell from buy. In issuing the downgrade, Cantor noted a competing bid is unlikely to materialize because Verizon's buyout price is reasonable. 

As a result, there are few catalysts to drive the stock higher, apart from the possibility that AOL will spin off its Huffington Post media site. Such a deal could potentially yield a $1 billion sale, according to a report in Re/code. Apparently, AOL and media company Axel Springer are in talks about a Huffington Post acquisition, Re/code noted.


Intel fell 1.4% to end the session at $32.25.

The chip giant stumbled after Citigroup analyst Chris Danely warned investors that Intel's 2015 full-year revenue outlook is likely too optimistic, according to a Barron's report.

Intel forecast flat year-over-year revenue when it generated $55.87 billion. However, Danely, according to Barron's, said that will be a hard figure for Intel to reach, given its historical performance in the second half of the year. Said Danely:

Intel requires roughly 17% revenue growth in 2H15 to achieve its 2015 revenue growth target of flat YoY. Since 2010, Intel has grown 2H revenue just 5% on average and has never had more than 8% revenue growth. We believe Intel is too bullish on its 2H outlook and as a result, we believe guidance and consensus estimates have to come down again.

Danely believes Intel is likely to bring in $54.28 billion in revenue for the year, according to Barron's


Rackspace Hosting plummeted 13.5% to close at $45.96.

The server hosting company took a hit after Morgan Stanley downgraded the company to equal-weight from overweight and cut its price target to $49 a share from $55.

Morgan Stanley noted the company appears well positioned for the long term but faces challenges in the near future, as a result of expected delays in booking sales to corporate customers and potential customer turnover.

Additionally, Rackspace reported a first-quarter revenue miss. For the first quarter, the company generated revenue of $480.2 million, whereas analysts were anticipating nearly $481.6 million.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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