On Wednesday, BMO (TSX:BMO) Capital Markets adjusted its outlook on Rackspace Technology Inc . (NASDAQ: NASDAQ:RXT), increasing its price target on the company's shares to $2.50 from the previous $1.50. Despite the heightened target, the firm maintained its Market Perform rating for the stock.
The adjustment follows Rackspace Technology's reported challenges in the recent quarter. The company experienced a revenue decline of approximately 9% in the December quarter, attributed to a combination of a weak services environment and ongoing internal changes.
BMO Capital anticipates that revenue growth for Rackspace may further deteriorate in the fiscal year 2024 before it potentially begins to improve in the fiscal year 2025. The firm's analysts suggest that revenue could start to stabilize more sequentially in the second half of the fiscal year 2024, particularly within the Private Cloud sector, due to effective bookings execution in the second half of the fiscal year 2023.
Additionally, BMO Capital forecasts a decline in operating profit for Rackspace Technology. The firm's stance remains at Market Perform, reflecting both the challenges and the potential for stabilization in the company's financial performance in the near future. The revised price target of $2.50 is indicative of this cautious optimism.
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