Amazon rumored to be planning to invest in cloud services company Rackspace Technology, acquiring a minority stake of its shares. A controlling stake belongs to Rackspace investment Corporation Apollo Global Management. Although the deal has not officially confirmed any of the parties, the shares of all companies mentioned above increased.
On Monday, shares of Amazon.com.Inc. (AMZN), Apollo Global Management (APO) and Rackspace Technology (RXT), the recent listing on NASDAQ (August 5, 2020), increased by 1.1% to 2.45% and 10.3%, respectively.
Positive news reports from Reuters, about potential investments by Amazon in the company Rackspace, which is both partner and competitor of the technology giant.
Rackspace is the expert in multi-cloud solutions, helping companies to migrate their workloads to the cloud Amazon Web Services (AWS) and other competitive cloud services from Microsoft (MSFT), Google (GOOG, GOOGL) and VMware (VMW).
The largest international investment company Apollo Global Management owns a controlling stake in at 65.1% of the votes in Rackspace.
In the course of its Rackspace IPO was valued at $4.2 billion based on shares in circulation. The IPO was successful because on the first day of Rackspace stock fell 22%. According to the listing documents, in the past year Rackspace has received total revenue of $2.44 billion and a loss of $102.3 million, compared to $2.45 billion in income and losses $470,6 million in 2018.
According to the assessment of Rackspace, its net loss in the second quarter of 2020 will be between $24 million and $44 million on revenue of $655 million to $657 million
Rackspace customers are 40% of the Fortune 100, the market coverage in 120 countries and approximately 6800 employees.
The company has not confirmed nor commented on the information to Reuters, but according to sources, if the deal Amazon purchases minority stake in Rackspace to be held, for approval can take from one to two months.
Amazon cloud business is still thriving, a division of AWS though shows a decline in growth compared with 33 per cent growth in the first quarter, traditionally the biggest source of profit for the company in the second quarter. Revenue from cloud services, AWS grew by almost 29% to $10,81 billion.
Increased demand from companies that are “shifting their operations to the online” growing in conditions of a pandemic and experts assure that in the future the trend will continue.
Despite the strong growth of 72.2 per cent from the beginning of the year, Amazon shares receive high ratings and forecasts on wall Street: the 38 analysts estimate the stock’s rating to “buy” 1 – rated “hold”. The average analytical target Amazon’s stock price of $3725,59 means that analysts give them a potential growth of 17% in the next 12 months.