The 2 Things Sellers Missed in Rackspace's Earnings Report


Anyone who needed a refresher in the dangers of owning high-growth stocks got one this week, when Rackspace Hosting reported fourth-quarter results that disappointed Wall Street. The stock fell 20% as a result.

Rackspace's "miss" featured plenty of impressive numbers. Overall, revenue improved 24.6%, while sales of cloud-hosted services rose 49.4%. Cash from operations grew 19.3%. All signs point to customers adopting Rackspace's most profitable services in greater volume, and that's despite intense competition from's formidable Web Services unit, which some say is due to bring the e-commerce titan more than $4 billion in revenue this year alone.

Can Rackspace grow at the brisk pace Wall Street wants in such a tough market? Tim Beyers of Motley Fool Rule Breakers and Motley Fool Supernova talked with Rackspace CEO Lanham Napier following the earnings call, and cites two good reasons for Foolish investors to remain optimistic. Click the video below to learn more, and then leave a comment to let us know what you think.

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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Rackspace Hosting at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+, Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool owns shares of Motley Fool newsletter services have recommended buying shares of Rackspace Hosting and The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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