RXT - Racksack Technology slumps 14% as Oppenheimer downgrades from outperform to perform

Oppenheimer cuts estimates on Rackspace (RXT -12.7%) to perform from outperform, while dropping $18 price target. The prior positive stance was based on company's pure-play cloud focus, but it is increasingly clear that reselling AWS/cloud is low margin and that adding high-margin services takes time. Oppenheimer mentions, "The company is going through a strategic review, which we expect to lead to more investment, as we are in the early cycle of very strong cloud growth, but Rackspace could decide to sell parts of the company, or all of it. However, increased macro headwinds, and very high debt (5x '22E net debt to EBITDA), warrant caution" Last month, RXT announced $75M share buyback. More recent news from the company, 'Rackspace Technology and Akamai Technologies to offer global consultancy services to small and mid-sized businesses'

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Racksack Technology slumps 14% as Oppenheimer downgrades from outperform to perform