RNG Stock Overview
RingCentral, Inc. provides software-as-a-service solutions that enable businesses to communicate, collaborate, and connect in North America.
RingCentral, Inc. Competitors
Price History & Performance
|Historical stock prices|
|Current Share Price||US$39.96|
|52 Week High||US$315.00|
|52 Week Low||US$39.54|
|1 Month Change||-6.59%|
|3 Month Change||-27.65%|
|1 Year Change||-82.53%|
|3 Year Change||-75.53%|
|5 Year Change||-10.80%|
|Change since IPO||119.56%|
Recent News & Updates
RingCentral: A Compelling Buying Opportunity
Summary RingCentral is now down almost 90% from its all-time high. Despite facing a tough backdrop, the communication software company continues to report decent growth rates while improving profitability. It is now trading at a historically low valuation. I rate the company as a buy. Investment Thesis RingCentral (RNG) has performed exceptionally well since going public, up over 1,000% from 2013 to 2020. The company saw a further boost in share price thanks to the pandemic, as the demand for communication software skyrocketed. However, as the pandemic waned and lockdown eased, investors started to worry about the company's future prospects. This and the broad market sell-off caused RingCentral to plummet, with shares now down almost 90% from the all-time high last year. I believe the massive sell-off is overdone and offers a good buying opportunity for long-term investors. While the world is moving on from the pandemic, hybrid work is here to stay. The opportunity in the communication software space remains huge. This is shown in the company's latest financials, with revenue up over 28% despite facing a slowing economy. The current valuation is also near its historical low and a lot of pessimism is already priced-in in my opinion. Therefore, I rate RingCentral as a buy. RNG data by YCharts Why RingCentral? RingCentral is a cloud communication software company operating in the UCaaS (united communication as a service) space. It provides enterprises with solutions for voice, message, video, and contact centers. Its integrated solution allows customers to seamlessly combine messaging, video conferencing, and phone calls into one unified platform. The company's current customers include SoFi (SOFI), Renault (RNLSY), and more. Unlike the pure video conferencing space, UCaaS has a better product breadth and wider user cases, which results in more durable market growth. According to Fortune Business Insights, the global UCaaS market is forecasted to grow from The global unified communication as a service market is expected to grow from $28.96 billion in 2021 to $69.93 billion in 2028, representing a CAGR (compounded annual growth rate) of 13.4% for the period. The growth is largely driven by the broader adoption of hybrid work and distance learning. The trend is not likely to stop any time soon as hybrid work and learning are more cost-efficient for businesses. Currently, RingCentral is the leading company in the UCaaS space alongside Microsoft (MSFT), as shown in the magic quadrant below by Gartner. It is even ahead of other giants like Cisco (CSCO) and Zoom (ZM). Unlike Zoom and Microsoft which focuses heavily on video, RingCentral focuses a lot on voice, message, and contact centers. While these segments are relatively niche, it differentiates them from other competitors and gives them a competitive advantage. The increasing popularity of Microsoft Teams is also providing tailwinds for RingCentral. As a lot of Teams' customers currently do not have voice services, they are now turning to RingCentral for other add-on solutions, such as voice and contact centers. Mo Katibeh, COO, on Teams' tailwinds Microsoft Teams, which continues to be a growth driver for RingCentral. Second quarter was the single largest quarter of growth yet. Now, the vast majority of Teams customers are on E1 or E3 licenses, which do not include any sort of phone or telephony service, a key part of any business identity. This creates an immediate opportunity to complete the cloud communication suite by adding a well-integrated UCaaS solution like RingCentral. And as to the minority of Teams customers who have an E5 license, first, they still require an incremental calling plan to make calls outside of their company. RingCentral Strong Financials Despite the pessimism surrounding the company, RingCentral posted another set of strong results, beating analysts' estimates and raising guidance once again. For Q3, the company reported revenue of $487 million, up 28% YoY (year river year) from $379 million. Subscription revenue increased 32% YoY from $351 million to $463 million. It also ended the quarter with an ARR (annualized recurring revenue) of $2 billion, up 38% YoY. The growth is attributed to the strong demand for its contact center solution and increased spending from existing customers. Vlad Shmunis, on second-quarter results: "Our second quarter key metrics exceeded the high end of our guidance range and demonstrated our consistent execution. We continue to see the benefits of scale, with solid top line contributions complemented by increasing bottom line profitability. The market opportunity in front of us is large, and customers continue to gravitate to RingCentral because of our industry leading UCaaS and integrated CCaaS solution, proven reliability and broad geographic reach." While the top line continues to be strong, what impressed me the most is the improvement in the bottom line. Non-GAAP operating income was $55 million, up 41% from $39 million. Non-GAAP operating margin was at a record high of 11.3%, up 110 basis points from the prior year. Margins continue to expand as shown in the chart below. Non-GAAP free cash flow increased significantly by over 104% from $14.4 million to $29.4 million, or 6% of revenue. Non-GAAP EPS was $0.45 compared to $0.32, up 40.6% YoY. The improvement in profitability is largely due to the economies of scale and better cost control.
RiverPark Funds - RingCentral: 35-40% Per Year Compounded Annual Return Long Term
Summary RingCentral has enjoyed greater than 28% revenue growth in every year since its IPO. RNG is well positioned to continue to win the lion’s share of this UCaaS migration. We expect gross margin to continue to improve from its already strong 80%. On our longer-term analysis, we calculate the potential for a compounded annual return of 35-40% per year through the end of the decade. The following segment was excerpted from this fund letter. RingCentral Inc (RNG) RingCentral is a software-as-a-service (SAAS) provider of communications solutions to large enterprises. The company's solutions replace legacy office phone systems or Private Branch Exchanges (PBX) with a cloud-based virtual solution that enables a customer's employees to communicate via voice, text, video/web conferencing, and fax over multiple devices including cell phones, tablets, and computers from any location. This cloud-based phone systems market, typically referred to as Unified-Communication-as-a-Service (UCaaS) is a roughly $10 billion market today and is projected to grow to over $100 billion over the next ten years as companies move their communications systems to the cloud. The move to UCaaS adoption is being driven by both the obsolescence of PBX hardware underlying current office phone systems, and, like cloud adoption across the software stack, cloud-based phone systems being less expensive, more feature rich, and accessible anywhere. RingCentral (which went public in 2013) is the leading vendor to the UCaaS market and has enjoyed greater than 28% revenue growth in every year since its IPO, a growth rate that continued in the company’s recently reported 1Q22 in which it grew revenue 33%. We believe the company can continue to grow revenue north of 25% for many years to come, driven by the global conversion of more than 400 million on-premises phone systems to the cloud. RingCentral is well positioned to continue to win the lion’s share of this UCaaS migration, as the company has partnered with many of the largest legacy PBX vendors (including Avaya, Atos, AlcatelLucent, and Mitel) to be their recommended cloud solution for customers whose maintenance period on their installed systems ends (and the vendors no longer support them). RNG has also partnered with communications giants like Vodafone, AT&T and Verizon to sell co-branded cloud solutions into their customer bases. As the company’s revenue scales, we expect gross margin to continue to improve from its already strong 80%, while we expect the company to continue to expand its EBITDA margin from 18% in 2022, toward typical SaaS margins of 40% or higher over the next several years. At its current stock price, RNG trades at about 5x our expected 2027 EPS and 2x our 2030 EPS. We project that the company will generate over 60% of its current enterprise value in excess free cash over the next 5 years and 150% of its current enterprise value in excess cash by the end of the decade. Using a historical market multiple of 18x 2027 EPS of $11.85 generates a target in 2026 (4 years hence) of $213, or nearly 4x today’s price. We believe these estimates to be conservative and we believe an 18x multiple is low for a business that is expected to be still being growing free cash flow at a healthy clip.
|RNG||US Software||US Market|
Return vs Industry: RNG underperformed the US Software industry which returned -33.2% over the past year.
Return vs Market: RNG underperformed the US Market which returned -23.2% over the past year.
|RNG Average Weekly Movement||9.9%|
|Software Industry Average Movement||8.7%|
|Market Average Movement||6.8%|
|10% most volatile stocks in US Market||15.5%|
|10% least volatile stocks in US Market||2.8%|
Stable Share Price: RNG is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 10% a week.
Volatility Over Time: RNG's weekly volatility (10%) has been stable over the past year.
About the Company
RingCentral, Inc. provides software-as-a-service solutions that enable businesses to communicate, collaborate, and connect in North America. The company offers business cloud communications and contact center solutions based on its Message Video Phone? platform.
RingCentral, Inc. Fundamentals Summary
|RNG fundamental statistics|
Is RNG overvalued?See Fair Value and valuation analysis
Earnings & Revenue
|RNG income statement (TTM)|
|Cost of Revenue||US$560.13m|
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
|Earnings per share (EPS)||-6.04|
|Net Profit Margin||-31.67%|
How did RNG perform over the long term?See historical performance and comparison