Rackspace Technology (RXT) exploded over 200% last week following a surprisingly strong earnings report and the announcement of a strategic partnership with AMD in the AI cloud infrastructure space. The stock, which was trading below $2 in early May, climbed to a 52-week high of $6 and is currently trading around the $5 mark.
The massive short squeeze was triggered by better-than-expected Q1 numbers: revenue of $678M (estimate: $660M), driven by 7% growth in the public cloud segment. CEO Gajen Kandiah announced the partnership with AMD for "governed enterprise AI infrastructure" – a new market segment with high potential.
Options traders who got in early made massive gains: call options with $5 strike and June expiry exploded. Implied volatility remains moderate despite the run, making further upside plays possible. Risk: private cloud revenue fell 6%, the stock is highly speculative and had massive volatility.
For options traders, RXT is currently a playground: short squeeze still active, AMD momentum intact, IV not yet overpriced. Those who understand the risk will find setups for June calls with limited risk.