RingCentral Has a Long Growth Runway but Faces Intensifying Competition; No Moat Rating, $48 FVE

We have transferred coverage of RingCentral and lower our moat rating to none, from narrow previously, and also lower our fair value estimate to $48 per share from $125. We still view RingCentral as one of several leading providers of unified communications as a service, or UCaaS. This simplified approach to communications provides greater flexibility to the firm and its employees at a lower cost. We think the importance of core communication, combined with the firm’s leadership position, provides RingCentral with a significant growth opportunity. However, uneven returns and intensifying competition inform our no-moat rating. Similarly, we reduce our fair value estimate as intensifying competition may limit growth and profitability. That said, we think the firm has shown signs of high customer switching costs for its installed base and could eventually move to a narrow moat if it can demonstrate more durable returns.