Rackspace stock falls after Oppenheimer cuts rating, removes price target

Shares of Rackspace Technology Inc. RXT, +0.55% dropped 3.0% in premarket trading Friday, after the cloud services company was downgraded by Oppenheimer analyst Timothy Horan, who said increased macro headwinds and “very high debt” warrants caution. Horan cut his rating to perform, after being at outperform since January 2021, and removed his $18 stock price target. He also cut his 2022 revenue estimate by 1% to $3.25 billion and his 2023 estimate by 3% to $3.50 billion, citing margin concerns. “Our positive stance was based on [Rackspace’s] pure-play cloud focus, but it is increasingly clear that reselling AWS/cloud is low margin and that adding high-margin services takes time,” Horan wrote in a note to clients. The stock has tumbled 18.7% over the past three months and plunged 57.2% over the past 12 months, while the S&P 500 SPX, +0.43% has slipped 5.6% this year and gained 9.8% the past year.