Rackspace Hosting (RAX): Serving more than 43,000 cloud computing customers

By Timothy Lutts, Chief Investment Strategist and Editor of Cabot Stock of the Month Report

From Cabot Wealth Advisory, 7/20/09  Sign up for free Cabot Wealth Advisory e-newsletter

One of my favorite stocks is in the technology industry, where we often find great growth stories in bull markets. Its name is Rackspace Hosting (RAX), and its business is simple; it delivers enterprise-level hosting services to businesses of all sizes all around the world. 

The company first came to my attention when our IT director selected it as the site for our Cabot server about two years ago, a choice that has proven wise. Rackspace differentiates itself from the competition—in an industry that risks commoditization—by promising “Fanatical Support” to its customers … and delivering.

More recently, on June 29 the stock earned a spot in Cabot Top Ten Report. Here’s some of what editor Michael Cintolo wrote:

“Started in San Antonio, Texas in 1998, the company now serves more than 62,000 corporate customers, including over 43,000 cloud computing customers. (Cloud computing involves hosting a customer’s applications over the Internet, thus freeing the customer from investing in, and caring for, applications. In this area, the company is positioned between low-rent Google and high-rent Microsoft.)  …  Looking at the numbers, we see excellent historical growth of revenues, as well as rosy projections by analysts. … RAX came public in August, 2008 [and] broke out to new price highs last week so now has no ceiling. Try to get on board on any normal pullback.”

When that was written, RAX was trading at 14, and Mike’s recommended buy range was 12 1/5 to 15. The stock did pull back calmly, on decreasing volume, touched 12 on three days, and has now returned to 14, setting up for an eventual breakout. I like it.

Editor’s Note: Cabot Top Ten Report is the #1 source of new stock ideas, like past winners Crocs, First Solar and Apple, just to name a few. Editor Michael Cintolo always has his eye on the market, looking to discover which stocks are going to be the leaders of the new bull market. Every Monday, Mike provides subscribers the market’s 10 hottest stocks, including a detailed fundamental and technical analysis. If you’re ready to discover the strongest stocks in the market today, Cabot Top Ten Report is right for you. Click here to get started today!

Tim LuttsTimothy Lutts

President, Chief Investment Strategist, Editor of Cabot Stock of the Month

Timothy Lutts heads one of America’s most respected independent investment advisory services, publishing eight newsletters to more than 165,000 subscribers around the world. Tim leads a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems. Under his leadership, Cabot has been honored numerous times by both Timer Digest and the Hulbert Financial Digest as among the top investment newsletters in the industry. Tim also edits Cabot Stock of the Month.