RingCentral's AI Strategy Promises Upside, Says Bullish Analyst In Stock Upgrade

Shares of RingCentral Inc RNG have been volatile since the company reported its first-quarter results earlier this month. 

The company seems to be gearing up to achieve operating margins of more than 20%, which should provide it ample free cash flows to pay down its sizable debt load, according to Needham.

The RingCentral Analyst: Ryan Koontz upgraded the rating for RingCentral from Hold to Buy, while establishing a price target of $42.

The RingCentral Thesis: With revenue growth slowing, the company has been demonstrating “impressive progress” in becoming more profitable, with “surgical cost cuts,” Koontz said in the upgrade note.

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“We expect slowing UCaaS growth to focus RNG on low knowledge worker verticals where Teams is less prevalent,” the analyst wrote. “Together with an expanding CCaaS portfolio, we see sustained 10%+ subscription revenue growth as achievable over the medium term,” he added.

“Fears of declining business lines appear overblown, and the company's early-mover strategy in AI, albeit immature in monetization, provides upside optionality,” Koontz further stated.

RNG Price Action: Shares of RingCentral are up 5.1% to $31.20 at the time of publication Friday.

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