da-kuk/E+ via Getty Images
The turnaround at Rackspace Technology (NASDAQ:RXT) is taking “longer-than-expected” investment firm Citi said on Monday, and potentially causing “elevated” investor fatigue.
Analyst Ashwin Shirvaikar, who has a sell rating on Rackspace Technology (RXT), lowered the firm’s price target to $1.25 from $1.50 after it reported third-quarter results last week, noting that the current valuation “doesn’t accurately reflect the downside potential remaining in forward estimates as estimates keep moving down.”
“Our forward revenue estimates move lower once again as macro headwinds persist (delayed decision-making, etc.) and there may be elevated levels of investor fatigue for those waiting for positive signs that the longer-than-expected turnaround is coming to fruition,” Shirvaikar wrote. “The company continued to opportunistically pay down debt, but a new Accounts Receivable securitization facility was leveraged to help achieve this…meanwhile leverage ratios remain relatively high (though the maturities are pushed out).”
During the third-quarter, Rackspace Technology lost an adjusted 4 cents per share as revenue fell 7.1% year-over-year to $732M. Analysts had expected a loss of 5 cents per share on $726.92M.
Looking forward, Rackspace (RXT) expects to lose between 3 and 5 cents per share on an adjusted basis, with revenue between $710M and $720M.
