RingCentral Hits New All-Time High: Here's What The Street Has To Say

RingCentral Inc RNG reported fourth-quarter results which sent shares flying to new all-time highs. Here is a summary of how some of the Street's top analysts reacted to the print.

Review

Ring's fourth quarter was highlighted by a subscription revenue beat of 5% versus a historical 2% to 4% typical beat and reaching "Rule of 40+," Bank of America analyst Nikolay Beliov wrote in a note. The subscription revenue growth was driven by strong large customer wins with contract sizes north of $1 million, larger mid and enterprise market deals, strong channel bookings and superior linearity.

Ring's strong outperformance shouldn't come as a surprise given a superior go-to-market strategy and execution, Rosenblatt Securities analyst Ryan Koontz wrote in a note. In fact, the company is likely the "strongest player" in the Unified Communications as a Service (UCaaS) market and can "out-execute" its larger and smaller peers.

Morgan Stanley analyst Meta Marshall noted three takeaways that need to be monitored:

1. The ACO migration will need to be done in multiple phases and is key to initial product adoption
2. The revenue beat in Q4 wasn't accompanied by margin leverage
3. Management couldn't offer any clarity on changes to its video product.

Related Link: Goldman Sachs Turns Bullish On RingCentral, Highlights Large Market Opportunity

Outlook

Management offered a 2020 outlook that was "nicely above consensus," including 25% to 26% subscription revenue growth, versus expectations of 24%, Needham analyst Richard Valera wrote in a note. Encouragingly, the guidance looks to be conservative and there are multiple drivers of upside potential from two sources: existing drivers including enterprise deals, channel and contact centers, and new contributors from Avaya, Atos and AT&T.

Ring's earnings makes it clear it has a path to a $1 billion run-rate is reasonable and will be driven by initiatives that generate little revenue today, Raymond James analyst Brian Peterson wrote in a note. Investors could be hesitant investing in a company that is up 160% since the end of 2018, but Ring remains is among the "most open-ended growth stories" in all of the SaaS market.

RNG Ratings And Price Targets

Ring's stock at around $220 per share implies a multiple of 18 times 2020 sales estimate and 14 times 2021 sales estimates, Goldman Sachs analyst Heather Bellini wrote in a note.

• BofA maintains at Buy, price target lifted from $237 to $245.
• Rosenblatt maintains at Buy, price target lifted from $215 to $245.
• Morgan Stanley maintains at Equal-weight, price target lifted from $195 to $205.
• Needham maintains at Buy, price target lifted from $220 to $240.
• Raymond James mainatins at Strong Buy, price target lifted from $190 to $250.
• Goldman Sachs maintains at Buy, price target lifted from $230 to $255.

Shares of RingCentral hit a new all-time high of $233.81 Tuesday morning. The stock traded around $227.53 at time of publication.