Rackspace Hosting (RAX) Expected to Sustain 20% Growth Levels in 2013 in Data Storage

February 21, 2013

Rackspace Hosting (RAX) could sustain double-digit growth levels for its managed cloud hosting offerings thanks to secular growth trends in the data hosting industry, among them cloud computing and the continued growth of Big Data and data storage outsourcing, says Todd C. Weller, CFA, Managing Director at Stifel, Nicolaus & Co., Inc.

“In the case of Rackspace, the stock has just chugged along — it’s been a great stock over a multiyear period, and it’s really around what kind of growth do they expect for 2013? Can they sustain this high 20% growth? We think they can,” Weller said. He also adds that the company’s OpenStack product offering is earning the company some big high-profile customer wins for its cloud business.

Weller says the secular outsourcing of IT infrastructure and management benefit RAX, and he says investors interested in data centers don’t have many options, leading them to focus on companies with RAX or Equinix (EQIX).

“There are just not that many investment options. And you have another angle here, which is that in many cases the REIT stocks are being looked at by REIT investors, whereas names like Equinix and Rackspace — they’re being looked at more by generalist tech, media, telecom investors, and there hasn’t historically been a lot of overlap,” Weller said.

FOR MORE INFORMATION ABOUT THIS INTERVIEW CLICK HERE.