Rackspace Hosting, Inc. (NYSE:RAX) — This company provides cloud-based and managed hosting solutions to small- and mid-size enterprise customers around the world.
While analysts at S&P Capital IQ have a “hold” rating on RAX stock, they expect revenue growth of 16% to 17% in 2015 and 2016. These growth estimates are down slightly from last year, which Capital IQ attributes to Rackspace’s transitioning of customers to its OpenStack cloud platform and increased adoption of hybrid could products. However, they see the ongoing shift to cloud computing benefitting the company and leading to more contract wins, and project EBITDA will grow between 15% and 20% for the next two years.
Credit Suisse Group AG (ADR) (NYSE:CS) has an “outperform” rating on RAX stock. Its analysts estimate earnings per share of $1.41 for 2015, up from $1.10 in 2014, and $1.70 in 2016.
From a technical viewpoint, RAX stock is in a powerful bull market that was confirmed on Monday by closing above a double-top at about $54.50. Shares have been receiving support from the 20-day moving average.
The recent breakout was confirmed by a strong buy signal from the MACD indicator and an increase in upside volume. There is also support at the 50-day moving average at $50.
My trading target for RAX stock is $62, which is 12% above the current price. Buy shares at the market with a stop-loss order at $49. Long-term investors should also consider holding RAX stock as a cornerstone investment in the expanding cloud-based data storage sub-sector.