Company Reports

No-moat RingCentral reported first-quarter results that bested our top-line expectations while meeting our profitability estimate. Management’s outlook was in line with or slightly better than our estimates for revenue and adjusted operating margin, while free cash flow was notably better. We see the company as progressing on its goal of becoming a multiproduct company, with RingCX off to a good start, while deleveraging and expanding margins. Given the results and guidance, our model changes are negligible, so we maintain our $51 fair value estimate. The shares remain undervalued, in our view, but we prefer wide-moat stocks in our coverage.

No-moat RingCentral reported fourth-quarter 2023 results that exceeded our profitability expectations and landed in line with our revenue assumption, while the outlook was slightly shy of our model. Vlad Shmunis made his return as CEO and emphasized his priorities for building a multiproduct business, expanding margins, and reducing stock-based compensation. The firm noted traction with new products, mainly RingCX, which it thinks can help drive $100 million in new annual recurring revenue by the end of 2025. The firm also detailed its improving balance sheet including continued repurchasing of convertible notes. Given results and guidance, our model changes are negligible, thus we maintain our fair value estimate of $51 per share. Shares remain undervalued in our view, but we prefer wide-moat stocks in our coverage.

RingCentral is a leading provider of unified communications as a service, or UCaaS, software that combines voice, video, and messaging communication modalities in one simple cloud-based application. This approach to communications provides greater flexibility to the company, its employees, and the customers it communicates with daily. We think the core importance of communication, combined with the company’s leadership position, provides RingCentral with a significant growth opportunity. However, uneven returns and intensifying competition inform our no-moat rating.

RingCentral is a leading provider of unified communications as a service, or UCaaS, software that combines voice, video, and messaging communication modalities in one simple cloud-based application. This approach to communications provides greater flexibility to the company, its employees, and the customers it communicates with on a daily basis. We think the core importance of communication, combined with the company’s leadership position, provides RingCentral with a significant growth opportunity. However, uneven returns and intensifying competition inform our no-moat rating.

No-moat RingCentral reported third-quarter results that exceeded our expectations, with solid performance on both the top and bottom lines, while the outlook was in line with our forecast. New CEO Tarek Robbiati highlighted his priorities, which include building a multiproduct business, focusing more on key segments and verticals, expanding partnerships, growing globally, and improving operations, which are easy for us to support. The firm highlighted traction with new products, notably RingCX and RingSense. RingCentral also provided an update on its improving balance sheet that includes continued refinancing and repurchasing of convertible notes. Given results and guidance, our model changes are minor, thus we maintain our fair value estimate of $51 per share. Shares remain undervalued in our view but we prefer wide-moat stocks in our coverage.

RingCentral is a leading provider of unified communications as a service, or UCaaS, software that combines voice, video, and messaging communication modalities in one simple cloud-based application. This approach to communications provides greater flexibility to the company, its employees, and the customers it communicates with on a daily basis. We think the core importance of communication, combined with the company’s leadership position, provides RingCentral with a significant growth opportunity. However, uneven returns and intensifying competition inform our no-moat rating.

No-moat RingCentral had a busy day, reporting slight upside relative to our expectations on both the top and bottom lines, announcing a new CEO, and introducing several new products. While guidance was maintained for the year, the outlook was slightly lower than we anticipated for the third quarter. Given results and guidance, our model adjustments are minor, thus we maintain our fair value estimate of $51 per share. Shares remain undervalued as the stock has lagged the market this year, but we continue to prefer wide-moat stocks in our coverage.

No-moat RingCentral opened its fiscal year well with results that surpassed both our expectations and the high-end of guidance on the top and bottom line. Additionally, management raised its full-year outlook as win rates remain stable and lead generation is strong despite challenging economic conditions. The macro environment resulted in fewer upselling opportunities along with longer sales cycles as deals are more heavily scrutinized and require additional levels of approval. Despite good performance and a raised outlook, we have not changed our longer-term thinking and therefore we are maintaining our fair value estimate of $51 per share. Shares remain undervalued as the stock has sold off this year, but we continue prefer wide-moat stocks under our coverage during this period of economic turmoil.

No-moat RingCentral reported mixed fourth-quarter results that were toward the low end of guidance for revenue but in line with its profitability outlook. Relative to our expectations, guidance was ahead on margins and light on revenue. We are encouraged that average revenue per user remains steady and above $30 with unchanged pricing and win rates, even if macro conditions continue to drive longer sales cycles and smaller deal sizes. The extended partnership with Avaya should be better for RingCentral as it has minimum seat commitments and no up-front commissions. We are also relieved to see the company improve its capital allocation flexibility. We continue to believe that RingCentral is well positioned to capitalize on the continuing migration of legacy PBX phone systems to the cloud. We lowered our growth expectations but raised our profitability estimates, which actually drive our fair value estimate up to $51 per share, from $48 previously. While shares look attractive following the aftermarket selloff, we continue prefer wide-moat stocks under our coverage during this period of economic turmoil.

RingCentral is a leading provider of unified communications as a service, or UCaaS, software that combines voice, video, and messaging communication modalities in one simple cloud-based application. This approach to communications provides greater flexibility to the company, its employees, and the customers it communicates with on a daily basis. We think the core importance of communication, combined with the company’s leadership position, provides RingCentral with a significant growth opportunity. However, uneven returns and intensifying competition inform our no-moat rating.

No-moat RingCentral reported good third-quarter results that exceeded the high end of guidance and FactSet consensus for revenue and adjusted operating margin. Relative to our model, fourth-quarter guidance was ahead on margins and light on revenue. The firm also announced a restructuring that will reduce the headcount by 10%, which management expects to drive about 350 basis points of non-GAAP operating margin improvement in 2023. We are encouraged that average revenue per user remains steady and above $30 with unchanged pricing and win rates, even if macroeconomic conditions continue to erode and incremental pressure builds on sales cycle length and deal sizes. We continue to believe RingCentral is well positioned to capitalize on the continuing migration of legacy PBX phone systems to the cloud. We lowered our near-term revenue forecast, but raised our profitability estimates, which leaves our fair value estimate unchanged at $48 per share. While shares look attractive, we prefer wide-moat stocks under our coverage during this period of economic turmoil.

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.

RingCentral is a leading provider of unified communications as a service, or UCaaS, software that combines voice, video, and messaging communication modalities in one simple cloud-based application. This approach to communications provides greater flexibility to the company, its employees, and the customers it communicates with on a daily basis. We think the core importance of communication, combined with the company’s leadership position, provides RingCentral with a significant growth opportunity. However, uneven returns and intensifying competition inform our no-moat rating.

RingCentral is a leading unified communications as a service, or UCaaS, provider that enables omnichannel business communication and collaboration on a single cloud-native platform, creating a holistic user experience. As an increasingly mobile workforce requires greater flexibility in business communications, we believe the firm’s offerings become more critical, and narrow-moat RingCentral should exhibit healthy long-term growth.

Narrow-moat RingCentral reported second-quarter results that exceeded both the high end of guidance and FactSet consensus for revenue and adjusted operating margin. We are encouraged that RingCentral maintained its full-year revenue guidance despite currency headwinds that are expected to continue to worsen, while adjusted operating margin guidance was bumped up slightly. Annual recurring revenue, or ARR, and pricing trends remain positive, and the demand environment appears healthy despite smaller deal sizes by larger customers in light of macro pressures. We continue to believe that RingCentral is well positioned to capitalize on the continuing migration of legacy PBX phone systems to the cloud. As our model already contemplated strength, we are maintaining our fair value estimate of $125 per share. With shares trading at a significant discount to our fair value, we see shares as attractive.

RingCentral is a leading unified communications as a service, or UCaaS, provider that enables omnichannel business communication and collaboration on a single cloud-native platform, creating a holistic user experience. As an increasingly mobile workforce requires greater flexibility in business communications, we believe the firm’s offerings become more critical, and narrow-moat RingCentral should exhibit healthy long-term growth.

Narrow-moat RingCentral reported strong first-quarter results that exceeded both the high-end of guidance and our at-FactSet consensus expectations for revenue and adjusted EPS. Management issued strong second-quarter guidance, and raised its full-year 2022 outlook, which we view as appropriate as the company generated a stellar pipeline in the first quarter, as well as strong bookings of around $100 million. As our model already contemplated upside and accelerating profitability, we are maintaining our fair value estimate of $275 per share. With shares trading at a significant discount to our fair value estimate, we currently see a highly attractive buying opportunity for investors.

RingCentral is a leading unified communications as a service, or UCaaS, provider that enables omnichannel cloud-based business communication and collaboration on one platform, creating a single user experience. As an increasingly mobile workforce requires greater flexibility in business communications, we believe the firm’s offerings become more critical, and narrow-moat RingCentral should exhibit healthy long-term growth.

RingCentral is a leading unified communications as a service, or UCaaS, provider that enables omnichannel cloud-based business communication and collaboration on one platform, creating a single user experience. As an increasingly mobile workforce requires greater flexibility in business communications, we believe the firm’s offerings become more critical, and narrow-moat RingCentral should exhibit healthy long-term growth.

Narrow-moat RingCentral reported strong fourth-quarter results that exceeded both the high end of guidance and our at-FactSet consensus expectations for revenue and adjusted EPS. Management issued strong first-quarter and full-year 2022 guidance, which we view as appropriate given the long growth runway created by several of the strategic initiatives from 2021. In the quarter, strategic partnerships experienced an acceleration of seat wins, with sequential growth across all partners in both number of accounts and seats per customer. We expect the investments made in expanding these strategic partnerships, namely with Mitel in the third quarter of this year, as well as rapid expansion in the number of global service provider relationships formed, will drive profitable growth for the firm in the coming years as their incremental contributions to sales are largely yet to come. As our model already contemplated upside and accelerating profitability, we are maintaining our fair value estimate of $275 per share. With shares trading at a discount to our fair value, we currently see an attractive buying opportunity for investors.