RingCentral Inc. (RNG)

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RingCentral, Inc. (RNG)

TipRanks
December 22, 2022

https://finance.yahoo.com/news/morgan-stanley-says-stock-market-024420052.html

RingCentral, is a communications tech company whose software packages offer solutions to the wide range of communications issues faced in the modern business office. At base, RingCentral’s products allow for users to route phone lines, video calling, screen sharing, call forwarding, and most other telecom features through the office’s centralized computer server, making it easier to manage business telecommunications. In addition, RingCentral’s packages are compatible numerous popular office applications, such as Outlook, Salesforce, and Google Docs, and are available on desktop computers as well as handheld tablet and smartphone devices.

RingCentral saw its shares surge during the pandemic and lockdown periods of 2020, when forced work-from-home put a premium value on business communication systems – and investors, seeking any silver lining at the time, pushed the stock prices up and up. Since then, however, the return to a more normal operating environment has shown that many of these companies are now facing the consequences of overinflated share prices and their recent overextended spending. RNG shares, in that context, are down 82% this year.

Even though the company’s shares are down, RingCentral has continued to see gains this year at both the top and bottom lines. In the last quarter reported, 3Q22, RNG had total revenues of $509 million, up 23% year-over-year. At the bottom line, the company’s non-GAAP diluted EPS was reported as 55 cents, up 52% from the 36 cents shown in the year-ago period. Both the revenue and earnings figures beat the forecasts. The wins were driven by a strong increase in ARR (annualized recurring revenue), which rose 25% y/y to reach $2.05 billion.

Morgan Stanley analyst Meta Marshall, in her coverage of RingCentral, is cognizant of the company’s long share price decline 2022, but sees 'near term upside.'

“We think the market is missing an opportunity as free cash flow from the company improves. RNG is currently trading at <2x24e Revenue and ~11x24e P/E, well below software peers. We appreciate the bear cases on RNG. However, at current levels we think RNG's valuation is reflecting more bear case scenarios on the top line and ignoring cash flow potential,” Marshall explained.

Quantifying RingCentral’s prospects, Marshall rates the stock an Overweight (i.e. Buy), with a $50 price target that indicates her confidence in a 47% upside by this time next year. (To watch Marshall’s track record, click here)

Tech-oriented companies are known for attracting plenty of Wall Street analyst attention, and RingCentral has no fewer than 21 recent analyst reviews on record. They break down 15 to 6 in favor of the Buys over Holds, for a Moderate Buy analyst consensus view. The shares boast an average price target of $51.47, which implies ~52% one-year gain from the current trading price of $33.96. (See RNG stock forecast on TipRanks)