In a report released yesterday, Michael Turrin from Wells Fargo maintained a Hold rating on RingCentral (RNG – Research Report), with a price target of $31.00.
Michael Turrin’s rating is based on a careful evaluation of RingCentral’s recent financial performance and future outlook. The analyst notes that while RingCentral’s subscription revenue growth rate has decreased to below 10%, there has been an improvement in operating margin to over 20%. Despite a slight revenue beat in the fourth quarter, the year-end results show a decrease from the substantial beats seen in previous years. The company’s Annual Recurring Revenue (ARR) grew to $2.3 billion, reflecting a significant slowdown from the 40% year-over-year growth observed two years earlier. Although enterprise ARR surpassed the $1 billion mark and SMB ARR is showing signs of stabilization, these factors contribute to the Hold rating as growth has moderated.
The guidance for fiscal year 2024 suggests modest revenue growth of 8-9% and an operating margin around 21%, which indicates a limited potential for improvement given the current macroeconomic conditions. The management’s focus on improving free cash flow and reducing stock-based compensation aligns with a strategy geared towards financial efficiency. However, macroeconomic uncertainty remains a challenge for upselling, which in turn affects growth prospects. Turrin’s report also takes into account the company’s valuation, with RingCentral’s shares trading at multiples that reflect competitive concerns within the Unified Communications as a Service (UCaaS) space, a transition towards emphasizing margin and value, and a generally slowing growth rate. These considerations substantiate the Hold rating assigned to RingCentral’s stock.
In another report released yesterday, Jefferies also maintained a Hold rating on the stock with a $35.00 price target.
See the top stocks recommended by analysts >>
TipRanks tracks over 100,000 company insiders, identifying the select few who excel in timing their transactions. By upgrading to TipRanks Premium, you will gain access to this exclusive data and discover crucial insights to guide your investment decisions. Begin your TipRanks Premium journey today.
RingCentral (RNG) Company Description:
Founded in 1999, California-based RingCentral, Inc. provides software-as-a-service solutions that enable businesses to communicate, collaborate, and connect in North America. The company’s products include RingCentral Professional, RingCentral Office, RingCentral Glip, and RingCentral Fax.
Read More on RNG:
