Rackspace (RAX) is more likely to be sold for $32 per share than the $3.5B, or approximately $27 per share, price reported by Reuters, research firm Oppenheimer wrote in a note to investors today. The shares of the cloud infrastructure provider are trading around $28.50 today.

REPORT OF IMPENDING DEAL: Rackspace is in talks to sell itself to private equity firm Apollo Global (APO), Reuters reported on Friday. Apollo is "negotiating a price" of over $3.5B, or about $27 per share, for Rackspace, the news service stated.

ANALYST REACTION: Rackspace is "more likely" to be sold for $32 per share than $27 per share, wrote Oppenheimer analyst Timothy Horan. Rackspace could slash its operating spending by 20% and increase its leverage to four times its earnings before interest, taxes, depreciation and amortization, Horan estimated. If these targets are reached, a private equity firm could pay $32 per share for the company and realize an internal rate of return of "just under 30%," the analyst indicated. Moreover, there is a "strong chance" that a tech company could bid "in the high $30s" for Rackspace, Horan believes. However, noting that insiders own about 15% of Rackspace, Horan says that the insiders could be willing to sell Rackspace to a private equity firm at a lower price if they are allowed to retain some equity. He raised his price target on the stock to $32 from $30 and kept an Outperform rating on the name.

PRICE ACTION: In early trading, Rackspace fell 2% to $28.67. On Thursday, the stock closed at $26.55.