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Rackspace Technology (RXT)
NASDAQ:RXT
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Rackspace Technology
(NASDAQ:RXT)
44Neutral
Positive Factors
Bookings Growth
Bookings in Public Cloud have grown quarter-over-quarter for three straight quarters and were at the highest level in two years.
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.
Segment Revenue Growth
Private Cloud grew quarter-over-quarter for the first time in many years, which is encouraging for improvement in segment revenue decline.
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 Revenue Decline
Public Cloud decline is forecasted to worsen due to the runoff of infrastructure re-sale revenue.
Rackspace Technology (RXT) vs. S&P 500 (SPY)
Market Cap
$335.79M
Dividend YieldN/A
Average Volume (3M)1.03M
Price to Earnings (P/E)―
Beta (1Y)2.40
Revenue Growth-7.44%
EPS Growth0.63%
CountryUS
Employees5,100
SectorTechnology
Sector Strength40
IndustrySoftware - Infrastructure
Share Statistics
EPS (TTM)-3.89
Shares Outstanding237,306,690
10 Day Avg. Volume817,341
30 Day Avg. Volume1,029,189
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.15
Price to Cash Flow (P/CF)2.10
P/FCF Ratio3.90
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$2.65Price Target Upside96.30% Upside
Rating ConsensusModerate Sell
Number of Analyst Covering3
Rackspace Technology Business Overview & Revenue Model
Company DescriptionRackspace Technology, Inc. operates as a multi cloud technology services company worldwide. It operates through Multicloud Services and Apps & Cross Platform segments. The company's Multicloud Services segment provides public and private cloud managed services, which allow customers to determine, manage, and optimize the right infrastructure, platforms, and services; and professional services related to designing and building multi cloud solutions and cloud-native applications. Its Apps & Cross Platform segment includes managed applications; managed security services in the areas of security threat assessment and prevention, threat detection and response, rapid remediation, governance, and risk and compliance assistance across multiple cloud platforms, as well as privacy and data protection services, including detailed access restrictions and reporting; data services; and professional services related to designing and implementing application, security, and data services. Rackspace Technology, Inc. was founded in 1998 and is headquartered in San Antonio, Texas.
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 faces significant financial challenges with declining revenue and high leverage. Negative profitability margins and operational inefficiencies raise concerns about long-term viability. Strategic actions are necessary to improve financial health.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 |
| -420.50M | -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 |
| 479.90M | 3.38B | 3.90B | 4.03B | 4.02B | Net Debt |
| 335.90M | 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
1.35
Price Trends
2.27
Negative
2.36
Negative
2.42
Negative
Market Momentum
-0.20
Positive
26.77
Positive
24.92
Neutral
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 1.35 is below the 20-day moving average (MA) of 1.77, below the 50-day MA of 2.27, and below the 200-day MA of 2.42, indicating a bearish trend. The MACD of -0.20 indicates Positive momentum. The RSI at 26.77 is Positive, neither overbought nor oversold. The STOCH value of 24.92 is Neutral, 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 (57)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
72 Outperform | $152.40B | 106.37 | 16.53% | ― | 22.44% | -18.31% | |
72 Outperform | $4.19B | 21.16 | 189.40% | ― | 5.05% | 103.11% | |
67 Neutral | $10.36B | 20.90 | 10.66% | ― | 4.70% | -7.33% | |
63 Neutral | $12.78B | ― | -1.24% | ― | 7.32% | 88.51% | |
57 Neutral | $18.45B | 9.41 | -13.97% | 2.74% | 5.04% | -23.56% | |
55 Neutral | $33.94B | ― | -8.71% | ― | 28.76% | 58.13% | |
44 Neutral | $335.79M | ― | 81.52% | ― | -7.44% | 0.63% |
* Technology Sector Average
Performance Comparison
RXT
Rackspace Technology
1.35
-0.33
-19.64%
AKAM
Akamai
68.21
-36.17
-34.65%
NOW
ServiceNow
727.60
-41.59
-5.41%
BOX
Box
28.42
1.04
3.80%
TWLO
Twilio
91.98
30.13
48.71%
NET
Cloudflare
97.45
2.62
2.76%
Rackspace Technology Earnings Call Summary
Earnings Call Date: Feb 20, 2025 | % Change Since: -53.13% | Next Earnings Date: May 13, 2025
Earnings Call Sentiment Positive
The earnings call demonstrated strong performance in terms of revenue, profit, and bookings, with notable achievements in the private and public cloud segments and significant growth in healthcare and AI engagements. However, there were challenges in profit margins and cash flow management, with expectations of a modest decline in private cloud revenues for 2025.Highlights
Exceeding Revenue, Profit, and EPS Guidance
Rackspace's fourth quarter results exceeded guidance for revenue, profit, and EPS, marking the tenth consecutive quarter of meeting or beating expectations.
Record-Breaking Sales Bookings
Record-breaking quarterly sales bookings, reaching the highest level since early 2023, with high double-digit growth both sequentially and year-over-year.
Strong Performance in Private Cloud
Fourth quarter private cloud bookings more than doubled sequentially and grew high double digits year-over-year. Full-year private cloud sales bookings were up 4% year-over-year, with a significant 42% growth in the second half compared to the first half.
Significant Growth in Healthcare and Sovereign Segments
Healthcare revenue grew 34% year-over-year, while sovereign revenue surged by 59%.
Public Cloud Growth and Innovation
Public cloud GAAP revenue was $417 million, surpassing guidance. Full-year public cloud bookings grew 22% year-over-year, with notable growth in data services driven by AI-related projects.
Positive AI Engagement
More than 50 customers and close to 200 AI opportunities in the pipeline, with successful deployments enhancing operational efficiency and decision-making.
Lowlights
Decline in Non-GAAP Gross Profit Margin
Non-GAAP gross profit margin was 20.6% of GAAP revenue, down 50 basis points sequentially and 172 basis points year-over-year.
Non-GAAP Operating Margin Decline
Non-GAAP operating margin for the full year of 2024 was 3.9%, down 146 basis points versus the prior year.
Free Cash Flow Usage
Full-year free cash flow usage was $71 million, indicating challenges in cash flow management.
Expected Modest Decline in Private Cloud Revenues for 2025
Anticipation of a modest year-over-year decline in private cloud revenues for fiscal 2025.
Company Guidance
In the Rackspace Fourth Quarter 2024 earnings call, the company reported robust performance metrics, surpassing guidance for revenue, profit, and EPS. Notably, bookings, measured by annual contract value, grew by high double digits both sequentially and year-over-year, driven by strong sales execution and a favorable demand environment. Full-year sales bookings increased by 14%, with a significant 32% growth in the second half compared to the first half. The private cloud segment achieved record sales bookings, with revenue up by 4% sequentially, while healthcare and sovereign revenue surged by 34% and 59%, respectively. Public cloud GAAP revenue reached $417 million, with full-year bookings up by 22%, fueled by AI-related projects. Looking ahead to fiscal 2025, Rackspace anticipates a modest year-over-year decline in private cloud revenues but expects strong momentum in bookings to support a shift towards a more resilient growth-focused business model. The company also highlighted plans for positive operating and free cash flow for the year.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.