Rackspace Hosting (RAX) Stock Drops After Analyst Action

NEW YORK (TheStreet) -- Shares of Rackspace Hosting (RAX) closed down 0.60% to $43.36 after Jefferies lowered its price target to $46 from $48 and reiterated its "hold" rating for the San Antonio, TX-based managed cloud company

Continued weakness in adoption of the company's OpenStack-based services by larger enterprises and the notion that companies may choose to hire cloud engineers to manage cloud workloads rather than outsource support resulted in Jefferies changing its price target, the analyst firm noted.

"Although RAX prides itself on customer service differentiation, long-term, we are concerned about a crowded market with competitors that have significant scale and market recognition," said Jefferies analyst Mike McCormack. "Despite pursuing a more hands-on approach to cloud support, RAX is likely to be impacted by price deflation from large scale public cloud operators."

Currently, the company is pursuing supporting workloads on third party cloud platforms and if successful, the addressable market would be significantly higher, according to Jefferies.

Separately, TheStreet Ratings team rates RACKSPACE HOSTING INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate RACKSPACE HOSTING INC (RAX) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, increase in net income and solid stock price performance. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

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