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Rackspace Technology (RXT)
NASDAQ:RXT
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Rackspace Technology
(NASDAQ:RXT)
Rating:44Neutral
Price Target:
$1.00
▼( -16.67% Downside)
Positive Factors
Growth in Private Cloud
Private Cloud grew quarter-over-quarter for the first time in many years, which is encouraging for improvement in segment revenue decline.
Healthcare Sector Growth
Rackspace is gaining traction with healthcare clients specifically in the Private Cloud industry, with expected revenue growth of about 30% year-over-year in the healthcare sector.
Public Cloud Bookings
Bookings in Public Cloud have grown quarter-over-quarter for three straight quarters and were at the highest level in two years.
Negative Factors
Demand Environment
A softer demand environment continues to inhibit a top-line re-acceleration.
EBIT Margins
RXT's adj. EBIT margins remain significantly lower than historical levels.
Public Cloud Decline
Public Cloud decline is forecasted to worsen due to the runoff of infrastructure re-sale revenue.
Rackspace Technology (RXT) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$294.36M
Dividend YieldN/A
Average Volume (3M)816.30K
Price to Earnings (P/E)―
Beta (1Y)1.96
Revenue Growth-6.14%
EPS Growth67.53%
CountryUS
Employees5,100
SectorTechnology
Sector Strength76
IndustrySoftware - Infrastructure
Share Statistics
EPS (TTM)-0.06
Shares Outstanding237,388,700
10 Day Avg. Volume941,751
30 Day Avg. Volume816,300
Financial Highlights & Ratios
PEG Ratio0.03
Price to Book (P/B)-0.29
Price to Sales (P/S)0.00
P/FCF Ratio-4.18
Enterprise Value/Market Cap11.67
Enterprise Value/Revenue0.31
Enterprise Value/Gross Profit6.94
Enterprise Value/Ebitda-3.26
Forecast
1Y Price Target
$1.93Price Target Upside60.83% Upside
Rating ConsensusHold
Number of Analyst Covering5
Rackspace Technology Business Overview & Revenue Model
Company DescriptionRackspace Technology (RXT) is a leading end-to-end multicloud technology services company. It specializes in designing, building, and operating cloud environments across all major technology platforms, including AWS, Google Cloud, Microsoft Azure, and others. With a focus on accelerating the value of the cloud during every phase of digital transformation, Rackspace Technology provides managed cloud services, professional services, and managed security services to businesses across various sectors.
How the Company Makes MoneyRackspace Technology makes money primarily through its managed cloud services, where it provides ongoing management, maintenance, and optimization of clients' cloud environments. The company also earns revenue through professional services, which involve consulting, designing, and implementing cloud solutions tailored to specific client needs. Additionally, Rackspace offers managed security services to help enterprises protect their cloud infrastructure. Key revenue streams include recurring subscription fees for managed services, one-time fees for professional services, and partnerships with major cloud providers like AWS, Google Cloud, and Microsoft Azure. These partnerships often involve reseller agreements and collaboration on joint solutions, further contributing to Rackspace Technology's earnings.
Rackspace Technology Financial Statement Overview
Summary
Rackspace Technology's financial statements show weaknesses across multiple areas. The income statement reveals declining revenue and significant net losses, suggesting operational inefficiencies. The balance sheet is concerning with negative equity and high debt, indicating financial instability. Cash flow is also weak, with negative free cash flow highlighting liquidity issues.Income Statement
Rackspace Technology exhibits declining revenue with a significant net loss, indicating operational challenges. The negative EBIT and EBITDA margins suggest inefficiencies and inability to cover operating expenses. The company needs to address cost controls and revenue growth to improve profitability.45
Neutral
Balance Sheet
The balance sheet reflects a concerning financial structure with negative stockholders' equity and high debt levels, indicating over-leverage. The debt-to-equity ratio is unfavorable, and the equity ratio is negative, suggesting financial instability and potential risk of insolvency.30
Negative
Cash Flow
Operating cash flow has seen fluctuations, with recent trends showing a decline. The free cash flow is negative, reflecting challenges in covering capital expenditures. The cash flow to net income ratios indicate inefficiency in converting income to cash, raising concerns about liquidity and operational sustainability.50
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 2.74B | 2.96B | 3.12B | 3.01B | 2.71B | Gross Profit |
| 533.40M | 648.60M | 856.90M | 936.80M | 984.40M | EBIT |
| -909.10M | -899.40M | -8.40M | 29.00M | 24.70M | EBITDA |
| -362.90M | -149.90M | -248.20M | 421.40M | 479.10M | Net Income Common Stockholders |
| -858.20M | -837.80M | -804.80M | -218.30M | -245.80M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 144.00M | 196.80M | 241.00M | 272.80M | 104.70M | Total Assets |
| 3.05B | 4.10B | 5.47B | 6.33B | 6.38B | Total Debt |
| 3.28B | 3.38B | 3.90B | 4.03B | 4.02B | Net Debt |
| 3.14B | 3.18B | 3.66B | 3.76B | 3.92B | Total Liabilities |
| 4.06B | 4.25B | 4.84B | 5.00B | 4.99B | Stockholders Equity |
| -1.00B | -154.50M | 629.50M | 1.33B | 1.38B |
| Cash Flow | Free Cash Flow | |||
| -71.20M | 278.00M | 178.90M | 262.40M | 200.00K | Operating Cash Flow |
| 39.90M | 374.90M | 259.30M | 370.80M | 116.70M | Investing Cash Flow |
| -86.60M | -96.00M | -97.90M | -69.00M | -128.40M | Financing Cash Flow |
| -3.00M | -312.80M | -187.00M | -132.20M | 29.90M |
Rackspace Technology Technical Analysis
Negative
1.20
Price Trends
1.50
Negative
2.01
Negative
2.23
Negative
Market Momentum
-0.09
Positive
28.08
Positive
10.69
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RXT, the sentiment is Negative. The current price of 1.2 is below the 20-day moving average (MA) of 1.32, below the 50-day MA of 1.50, and below the 200-day MA of 2.23, indicating a bearish trend. The MACD of -0.09 indicates Positive momentum. The RSI at 28.08 is Positive, neither overbought nor oversold. The STOCH value of 10.69 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for RXT.
Rackspace Technology Risk Analysis
Rackspace Technology disclosed 57 risk factors in its most recent earnings report. Rackspace Technology reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Rackspace Technology Peers Comparison
Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
69 Neutral | $854.70M | ― | -18.61% | ― | 4.11% | -935.85% | |
65 Neutral | $422.34M | ― | -0.32% | ― | 18.51% | 97.57% | |
62 Neutral | $453.74M | 5.11 | -94.58% | ― | -2.75% | -4.13% | |
60 Neutral | $11.56B | 10.24 | -7.04% | 2.94% | 7.46% | -10.54% | |
60 Neutral | $3.99B | ― | -12.09% | ― | 11.79% | 35.35% | |
44 Neutral | $294.36M | ― | 81.52% | ― | -6.14% | 67.53% |
* Technology Sector Average
Performance Comparison
RXT
Rackspace Technology
1.13
-0.85
-42.93%
YEXT
Yext
6.69
1.35
25.28%
BAND
Bandwidth
13.71
-7.55
-35.51%
TENB
Tenable Holdings
32.05
-11.36
-26.17%
CCSI
Consensus Cloud Solutions
22.09
2.26
11.40%
Rackspace Technology Earnings Call Summary
Earnings Call Date:May 08, 2025
(Q1-2025)
| % Change Since: -16.67%|
Next Earnings Date:Aug 12, 2025
Earnings Call Sentiment Positive
Rackspace's earnings call reflected a positive sentiment with strong performance across key metrics, successful strategic partnerships, and growth in important sectors like Public Cloud and regulated industries. However, challenges such as revenue declines in Private Cloud and macroeconomic uncertainties were noted.Q1-2025 Updates
Positive Updates
Exceeded Expectations Across All Key Metrics
Rackspace's first quarter 2025 results exceeded expectations for revenue, profit, and EPS, marking the 11th consecutive quarter of meeting or exceeding guidance.
Strategic Partnership with Rubrik
Rackspace announced a strategic partnership with Rubrik to launch the Cyber Recovery Cloud, expected to drive revenue starting in 2025.
Public Cloud Bookings Growth
Public Cloud bookings grew 16% year-over-year, driven by a 26% increase in The Americas.
Operational Turnaround and Efficiency Improvement
Non-GAAP operating profit grew 83% year-over-year, with significant growth in cash flow from operations and free cash flow.
Expansion in Regulated Industries
Rackspace secured wins in the healthcare and energy sectors, including a new deal with a healthcare provider and a European energy company.
Negative Updates
Revenue Decline in Private Cloud
Private Cloud revenue for the first quarter was $250 million, down single-digits year-over-year due to customers rolling off older generation offerings.
Macroeconomic Uncertainty
The broader macroeconomic environment may impact onboarding timelines for recently closed deals and customer decision cycles in the short term.
Decline in Total Company GAAP Revenue
Total company GAAP revenue was $665 million, down 4% year-over-year, meeting the high-end of guidance despite the decline.
Company Guidance
In the first quarter of 2025, Rackspace Technology exceeded expectations across all key metrics, with revenue at the high-end of guidance and profit and EPS surpassing the guidance range. The company reported a 9% year-over-year growth in bookings, measured by annual contract value, notably achieving a 13% increase in The Americas. Non-GAAP operating profit saw an impressive 83% year-over-year growth, accompanied by significant growth in cash flow from operations and free cash flow. The company also highlighted its strategic partnership with Rubrik to launch Cyber Recovery Cloud, which is expected to drive revenue starting in 2025. Despite macroeconomic uncertainties, Rackspace remains poised to capitalize on secular trends with its strategic focus on Private Cloud and AI, evidenced by a 20% hypothetical growth in Private Cloud bookings if certain deals closed earlier, and a 16% year-over-year increase in Public Cloud bookings. Guidance for the second quarter projects GAAP revenue between $653 million and $665 million, with total non-GAAP operating profit expected to be between $25 million and $27 million, and a non-GAAP loss per share forecasted at $0.04 to $0.06.Rackspace Technology Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
Rackspace Technology Announces Leadership and Board Changes
Neutral
Jan 17, 2025
On January 15, 2025, Rackspace Technology announced changes to its Board and executive leadership, including the appointment of Vikram Mahidhar as a new director, bringing AI and data expertise to support Rackspace’s growth strategy. Jeffrey Benjamin succeeded David Sambur as the Independent Chairman of the Board, with the company’s CEO, Amar Maletira, temporarily leading the Private Cloud business following Brian Lillie’s departure. These transitions are part of a broader strategy to enhance Rackspace’s market position and operational leadership, alongside reaffirming its financial guidance for the fourth quarter of 2024.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.