RingCentral Inc. (RNG), after declaring its first-quarter earnings earlier this month, experienced some volatility on its shares.
According to Needham, the company has been preparing to achieve operating margins above 20%, which would afford the company plenty of free cash flows to settle their substantial debt.
Ryan Koontz, the RingCentral Analyst, has raised the rating for RingCentral from Hold to Buy, while setting a target price of $42.
The RingCentral Thesis: According to Koontz’s upgrade note, with revenue growth slowing, the business has been making significant improvements in profitability, with careful cost-cutting measures. The analyst speculated that the declining growth pattern in the UCaaS market would make the RNG focus on low-knowledge worker verticals where Teams is less prevalent, forecasting consistent subscription revenue growth of more than 10% for the medium term. “Together with an expanding CCaaS portfolio, we see sustained 10%+ subscription revenue growth as achievable over the medium term,” he concluded.
“Fears of declining business lines appear overblown, and the company’s early-mover strategy in AI, albeit immature in monetization, provides upside optionality,” Koontz had further elaborated.
RNG’s Price Action: At the time of release, RingCentral shares closed 5.1% higher at $31.20.
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