Rackspace Hosting Shares Popped Then Dropped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Rackspace Hosting (NYS: RAX) soared as much as 14% before falling all the way back down to 2% as of this writing. A good earnings report wasn't good enough to overcome a tech sell-off.

So what: Revenue rose 32% year-over-year to $247.2 million as Rackspace added more than 10,000 customers and 3,500 servers during the quarter. Profits improved 62.5% to $0.13 a share. Analysts were expecting $0.12 a share on $241.3 million in revenue, according to data compiled by Yahoo! Finance.

Now what: Call it just another great performance for Rackspace, which has now seen year-over-year revenue growth accelerate for three consecutive quarters. Or maybe call it a buying opportunity. Sure the stock trades for 46 times next year's consensus earnings estimate, but efficient growers like Rackspace almost never trade on the cheap. Do you agree? Disagree? Weigh in using the comments box below.

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At the time this article was published Fool contributorTim Beyersis a member of theMotley Fool Rule Breakersstock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim'sportfolio holdingsandFoolish writings, or connect with him onGoogle+or Twitter, where he goes by@milehighfool. You can also get his insightsdelivered directly to your RSS reader.Motley Fool newsletter serviceshave recommended buying shares of Rackspace Hosting. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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