Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 30 years of experience in the Korean/Asian equity research. Major sectors coverage include the following:
- Technology 
- Consumer 
- Special Situations/Deep Value Plays
- Tender Offers/M&As
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

Rackspace IPO: How "Sexy" Is the New Rackspace?

NCino IPO Valuation Analysis - A SaaS Company for Banks & Financial Institutions

Equity Capital Markets

Rackspace Technology  / Equity Capital Markets

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Our valuation analysis of <a href="https://www.smartkarma.com/entities/rackspace-technology" target="_blank" data-smartkarma-citation="entities:11040:1" rel="noopener">Rackspace Technology (RXT US)</a> suggests an EV of $7.7 billion, a market cap of $4.6 billion, and a target price of $23.1 per share.  The IPO price range is from $21 to $24 per share so given the lack of upside (comparing our target price to the IPO price range), we would avoid this deal. 
Although Rackspace Technology's financials are improving in 1H 2020, the degree of improvement is modest. In addition, the sales growth in 2020 is likely to be in the 7-9% range so the company's sales growth remains a bit dull. Also, although the company's business model is becoming less capital intensive, there has yet to be a lack of meaningful improvements in its operating margins. Furthermore, the company is highly leveraged and if the interest rates start to increase in 2021, this could negatively impact the company. 
All of these factors make Rackspace Technology IPO a poor investment, in our view. 
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Our valuation analysis of Rackspace Technology (RXT US) suggests an EV of $7.7 billion, a market cap of $4.6 billion, and a target price of $23.1 per share.  The IPO price range is from $21 to $24 per share so given the lack of upside (comparing our target price to the IPO price range), we would avoid this deal. 
Although Rackspace Technology's financials are improving in 1H 2020, the degree of improvement is modest. In addition, the sales growth in 2020 is likely to be in the 7-9% range so the company's sales growth remains a bit dull. Also, although the company's business model is becoming less capital intensive, there has yet to be a lack of meaningful improvements in its operating margins. Furthermore, the company is highly leveraged and if the interest rates start to increase in 2021, this could negatively impact the company. 
All of these factors make Rackspace Technology IPO a poor investment, in our view. 


Rackspace Technology IPO Valuation Analysis