Barclays analyst Ramsey El-Assal has revised the price target for Rackspace Technology (RXT, Financial), reducing it from $2 to $1 per share. Despite maintaining an Underweight rating on the stock, the analyst indicated that the company's first-quarter earnings estimates appear attainable, attributing this to steady demand trends within the IT services sector.
El-Assal's recent analysis, however, highlights concerns about tariff-driven uncertainty, which casts a shadow over forecasts for the latter part of the year. This uncertainty introduces considerable risks to the anticipated growth acceleration during that period.
The firm's cautious stance underscores potential challenges for Rackspace as it navigates these external economic pressures. Investors are advised to consider these factors when evaluating the stock's future performance.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 6 analysts, the average target price for Rackspace Technology Inc (RXT, Financial) is $2.95 with a high estimate of $3.50 and a low estimate of $2.00. The average target implies an upside of 112.23% from the current price of $1.39. More detailed estimate data can be found on the Rackspace Technology Inc (RXT) Forecast page.
Based on the consensus recommendation from 6 brokerage firms, Rackspace Technology Inc's (RXT, Financial) average brokerage recommendation is currently 3.0, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Rackspace Technology Inc (RXT, Financial) in one year is $2.17, suggesting a upside of 56.12% from the current price of $1.39. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Rackspace Technology Inc (RXT) Summary page.
RXT Key Business Developments
Release Date: February 20, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rackspace Technology Inc (RXT, Financial) exceeded guidance for revenue, profit, and EPS for the 10th consecutive quarter.
- Record-breaking quarterly sales bookings, with high double-digit growth in annual contract value both sequentially and year over year.
- Strong performance in the Americas and increasing adoption of hybrid cloud solutions contributed to a 14% growth in sales bookings for fiscal 2024.
- Significant acceleration in private cloud bookings, with a 42% growth in the second half of 2024 compared to the first half.
- Public cloud bookings grew 22% year over year, driven by robust performance in services and infrastructure resale, with data services bookings more than doubling.
Negative Points
- Non-GAAP gross profit margin for the full year 2024 was down 172 basis points year over year.
- Non-GAAP operating margin for the full year 2024 was down 146 basis points versus the prior year.
- Free cash flow usage was $71 million for the full year, indicating cash flow challenges.
- Private cloud revenues are expected to show modest declines in fiscal 2025, despite recent momentum.
- Infrastructure resale volumes are difficult to predict and may face declines depending on contract renewals.
