NEW YORK (AP) -- Shares of Rackspace Hosting Inc., which provides data-storage and other services for other companies and groups, jumped to an all-time high Tuesday, a day after the company reported a strong fourth quarter.
THE SPARK: After the market closed on Monday, Rackspace said it earned $25 million, or 18 cents a share, in the last three months of 2011. That was more than the 16 cents per share analysts expected on average, according to FactSet. And it was 85 percent more than the $13.5 million, or 10 cents a share, the company reported earning a year earlier.
Revenue rose 32 percent to $283 million, from $215 million. That was roughly in line with the $281 million analysts forecast.
THE BIG PICTURE: Rackspace is a leading provider of cloud-computing services, a growing field in which companies store software and content in remote data centers for their customers. Cloud computing is Rackspace's primary business, while other large providers such as Amazon.com Inc., Oracle Corp. and Hewlett-Packard Co. have many other lines of business.
As a result, gains and losses in cloud computing customers have a large impact on Rackspace's finances. The company, which is based in San Antonio, Texas, said it gained about 11,000 customers, or 7 percent, to 172,510 during the quarter.
THE ANALYSIS: Frank G. Louthan IV, an analyst at Raymond James & Associates, raised his target for the company's shares to $54, from $46. He said Rackspace shows impressive growth with no signs of a slowdown.
"Rackspace appears better positioned than competitors to take share in this segment, as it offers a more complete portfolio to customers, as well as excellent customer service," he wrote.
Patrick Walravens of JMP Securities raised his price target to $58, from $48, saying the cloud-computing market is lightly penetrated and still offers large opportunities for growth. He said the constraint on Rackspace's growth is not demand but its ability to hire and train enough employees to maintain its high service standards.
SHARE ACTION: Shares jumped $5.52, or 11.2 percent, to $54.75 Tuesday morning, topping both their all-time closing high of $49.65 and all-time intraday high of $50.38, both set on Thursday.
1 comment