RingCentral On Track To Retire $1.6B Debt In FY26 With Strong FCF Focus: Analyst Forecasts

Needham analyst Ryan Koontz reiterated a Buy rating on RingCentral, Inc RNG, raising the price target to $46 from $42.

The company recently reported Q2 results, where earnings beat estimates. 

2Q OM expansion (+840bp y/y) sustained an impressive trend, and the company tapped its new term loan to pay down $460 million of its looming $1.6 billion debt due in 2025/26, notes the analyst.

With OM expansion beyond 20% likely slowing along with revenue growth next year, Koontz still sees sufficient cash flow to address debt concerns.

Together with an expanding CCaaS portfolio, the analyst forecasts sustained 10%+ subscription revenue growth as achievable over the medium term.

For FY23, RNG maintained its subscription revenue growth guidance of 11%, the analyst notes.

Following Q2, Koontz sees strong recent evidence of RNG pivoting to a more mature, profit-focused operating model and on track to surpass 20% NG OM entering FY24. 

Key RNG partnerships with many of the world's leading enterprise PBX and global service providers enable reach at a global scale that should allow the company to grow share, adds the analyst.

With its strong FCF focus, the analyst expects RNG to alleviate investor concerns and track toward retiring its $1.6 billion in debt in 2026.

Price Action: RNG shares are trading lower by 18.5 to $31.78 on the last check Tuesday.