Option Trade 
Rackspace Hosting, Inc. (NYSE:RAX) Calls 
Monday, 9th May, 2016

** OPTION TRADE: Buy the RAX Jun 17 2016 22.000 call at approximately $2.00. Place a pre-determined sell at $4.00.

Note: No protective stop losses added -- but if you wish to do so make it $0.80.

by Ian Harvey

May 09, 2016

Rackspace Hosting, Inc. (NYSE: RAX), operating in the managed cloud segment of the business information technology (IT) market, will report first quarter earnings after the market closes today, Monday 9th May.

For the current quarter, the 19 analysts offering adjusted EPS forecast have a consensus estimate of $0.22 a share, which would compare with $0.20 in the same quarter last year. They have a high estimate of $0.31 and a low estimate of $0.18. Revenue for the period is expected to total nearly $518.95M from $480.20M the year-ago period.

According to Zacks, “As the world’s leader and specialist in hosting, Rackspace Hosting is changing the way businesses worldwide buy IT. Rackspace delivers computing-as-a-service, integrating the industry’s best technologies into a flexible service offering, making computing more reliable and affordable. A trusted partner to companies of all sizes, Rackspace enables IT departments to be more effective. Rackspace is distinguished by its award-winning Fanatical Support, furthering the company’s mission to be one of the world’s greatest service companies. Rackspace featured in the top 30 of both the Sunday Times 100 Best companies to work for list and the Financial Times Great Place to Work Awards, 2008. Rackspace’s portfolio of hosted services includes managed hosting, email hosting and cloud hosting“.

Rackspace Hosting traded up 2.01% on Friday, reaching $22.29. Rackspace Hosting has a 12 month low of $15.05 and a 12 month high of $56.20. The firm has a 50-day moving average of $21.57 and a 200-day moving average of $23.57. The stock has a market capitalization of $3.24 billion and a P/E ratio of 27.51.

Rackspace Hosting (NYSE:RAX) last announced its quarterly earnings data on Tuesday, February 16th. The hosting company reported $0.24 EPS for the quarter, beating the Zacks’ consensus estimate of $0.23 by $0.01. The company had revenue of $522.80 million for the quarter, compared to analyst estimates of $521.53 million. During the same period in the prior year, the company posted $0.26 EPS. The firm’s quarterly revenue was up 10.7% on a year-over-year basis. On average, equities research analysts expect that Rackspace Hosting will post $0.96 earnings per share for the current fiscal year.

One research analyst has rated the stock with a sell rating, thirteen have issued a hold rating, ten have assigned a buy rating and two have given a strong buy rating to the stock. The stock has a consensus rating of “Buy” and an average price target of $33.41.

Harvey’s Options Volatility Indicator

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

** OPTION TRADE: Buy the RAX Jun 17 2016 22.000 call at approximately $2.00. Place a pre-determined sell at $4.00.

Note: No protective stop losses added -- but if you wish to do so make it $0.80.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.

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