Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, Web-hosting company Rackspace Hosting (NYSE: RAX ) has earned a respected four-star ranking.
With that in mind, let's take a closer look at Rackspace and see what CAPS investors are saying about the stock right now.
Rackspace facts
| Headquarters (founded) | San Antonio, Texas (1998) |
| Market Cap | $5.7 billion |
| Industry | Internet software and services |
| Trailing-12-Month Revenue | $1.4 billion |
| Management | CEO A. Lanham Napier (since 2006) Chief Strategy Officer Lewis Moorman IV (since 2011) |
| Return on Equity (average, past 3 years) | 13.7% |
| Cash/Debt | $278.6 million / $105.8 million |
| Competitors | AT&T IBM Amazon.com |
Sources: S&P Capital IQ and Motley Fool CAPS.
On CAPS, 93% of the 87 members who have rated Rackspace believe the stock will outperform the S&P 500 going forward.
Earlier today, fellow Fool Simon Erickson (TMFInnovator) tapped Rackspace as a particularly timely bargain opportunity:
This is a great business that is just getting hammered by Wall Street. The drop this past week is truly a GIFT to long-term investors.
-The company's Fanatical Support (i.e. fanatical focus on customer service) is a bigger deal than most give it credit for. They do this to increase stickiness and induce switching costs -- both of which are strong forms of a competitive advantage.
- Rackspace's CEO, Lanham Napier is a visionary, but he is also very good at adapting to changes in the industry. ...
It's going to take time and patience to convert businesses and users to use OpenStack. That uncertainty is what is holding the stock back right now. But if they establish a dedicated user base for developing public/private cloud infrastructure, they'll have recurring revenues for years into the future.
Even after the drop, RAX is still trading at a forward P/E of around 30. But don't let the pricetag fool you: this is a buy right now. There is plenty of space to fly in this cloud.
If you want market-topping returns, you need to put together the best portfolio you can. Of course, despite its four-star rating, Rackspace may not be your top choice.
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