Similar to Amazon, Rackspace rents out computing powers to others and run data centers. It was richly valued and has recently fallen on hard times due to pricing pressures coming from Amazon, Google, and Microsoft, all of which has better economies of scale.
Two of its competitors, Equinix (EQIX) and Digital Realty Trust (DLR) have similar business models but have held up much better due to their REIT status. If they have similar economics and face the same competitive pressure, I understand REITs are valued based on their funds from operations (FFO) but does REIT status really change valuation this much? Shouldn't they eventually converge somewhat? |
