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 Web-hosting company Rackspace Hosting (NYS: RAX) climbed 10% on Tuesday after its quarterly results topped Wall Street expectations.
So what: Rackspace's fourth-quarter beat -- adjusted EBITDA of $102 million versus the consensus of $94.5 million -- shows that demand for the company's cost-effective "cloud" solutions remains particularly strong. The stock is even hitting a new three-year high on the news, suggesting that Mr. Market expects the operating momentum to continue.
Now what: After having crossed $1 billion in sales in 2011, management also sees the same type of growth in 2012. "We are on pace to achieve another billion in a fraction of the time that it took our company to grow to its first billion," said CEO Lanham Napier. Buying into a hot, high P/E stock isn't exactly ideal, but given the undeniable tailwinds working in its favor, Rackspace might be one of those plays that will always seem expensive.
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