RXT - Rackspace tops Q4 estimates but investors worry about operating leverage

Yesterday, Rackspace Technology (RXT) reported upside Q4 results but the 2021 outlook fell short on profit with  $0.95-1.05 versus the $1.13 consensus and revenue of $2.9-3.1B, in-line with the $2.94B estimate. Operating profit was forecast at $500-530M vs. $473M last year.During the earnings call, management said capital intensity will be slightly higher in H1 due to investments in the business and should come in at 7-9% for the year vs. the 7% in Q4 and 8% for 2020. Evercore analyst Amit Daryanani understands "investor angst around the lack of operating leverage in CY21" but sees this as the restult of short-term issues like the expansion of service offerings and the pandemic-driven acceleration in customers moving more towards the cloud.The analyst says Rackspace's new CFO Amar Maletir is focusing on optimizing operating leverage and "outsized" FCF growth.Evercore maintains an Outperform rating and $26 price target on Rackspace, saying the company is well-positioned for

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Rackspace tops Q4 estimates but investors worry about operating leverage