Key insights
- UBS raised its price target for Rackspace Technology (RXT) to $5.50, citing AI expansion and strategic growth in Saudi Arabia. Despite a significant year-to-date surge, UBS maintains a Neutral rating due to the stock appearing overvalued and the company remaining unprofitable. The firm is encouraged by RXT's shift towards AI implementation and managed services, supported by new partnerships with Palantir and AMD. While regional expansion and demand for enterprise cloud adoption are positive, limited near-term revenue contribution and an uncertain environment temper bullish sentiment.
Investing.com - UBS raised its price target on Rackspace Technology Inc. (NASDAQ:RXT) to $5.50 from $5.00 while maintaining a Neutral rating on the shares. The stock currently trades at $5.93, above the new target, following a remarkable 477% year-to-date surge. According to InvestingPro analysis, the stock appears overvalued at current levels.
The firm noted Rackspace is establishing regional headquarters in Riyadh, Saudi Arabia, to accelerate cloud and AI growth. UBS views this as a sign of increased demand for the company’s enterprise cloud adoption across the region.
The Riyadh regional headquarters is expected to serve as a strategic hub for technology operations and customer engagement efforts. UBS believes this could help accelerate digital transformation across enterprise, government, and regulated industries.
The move follows recent alliances including a partnership with Palantir to drive enterprise adoption of Palantir’s Foundry and Artificial Intelligence Platform. Rackspace also partnered with AMD to establish a new category of governed Enterprise AI Cloud infrastructure for regulated and sovereign workloads.
UBS said it is encouraged that Rackspace is shifting to AI implementation and a managed services partner from commodity cloud infrastructure provider. The firm remains Neutral-rated amid limited near-term revenue contribution and an uncertain environment. InvestingPro Tips highlight that the company remains unprofitable with analysts not anticipating profitability this year, while the stock trades with high volatility reflected in its beta of 3.05. For deeper insights, investors can access RXT’s comprehensive Pro Research Report, one of 1,400+ available for US equities.
In other recent news, Rackspace Technology reported its Q1 2026 earnings, showcasing a mixed financial performance. The company exceeded revenue expectations with $678 million, surpassing the forecast of $674.95 million. However, its earnings per share (EPS) missed projections, coming in at -$0.06 compared to the expected -$0.03. Despite this, the company has been gaining attention for its strategic partnerships in AI and cloud services, particularly with AMD. Rackspace announced a memorandum of understanding with AMD to integrate AMD CPUs and GPUs across its AI infrastructure. This partnership has been a contributing factor to BMO Capital raising its price target for Rackspace from $2.00 to $5.00 while maintaining an Outperform rating. The stock has also seen significant activity in the market, with a notable increase in value attributed in part to short covering. These developments highlight Rackspace’s ongoing efforts to strengthen its position in the technology sector.
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