Analysts Hike RingCentral Targets After Third Straight Quarter of Subscription Acceleration
RNG has more than doubled off its 52-week low of $24.14.
Summary
RingCentral shares rose 7% Friday morning after Q3 results showed subscription revenue growth accelerating for a third straight quarter to 6.0%, up from 5.6% in Q1 and 5.8% in Q2 — the first time above 6% in six quarters. Subscription revenue came in about 105bps above the guidance midpoint versus roughly 50bps last quarter, which Morgan Stanley called the strongest topline quarter in some time. Analysts repriced aggressively even where ratings stayed put: Morgan Stanley more than doubled its target to $91 from $41 (Equal-weight), Piper Sandler went to $94 from $43 (Neutral), and RBC raised to $105 from $85 (Outperform). RBC flagged that ARR from customers using at least one native paid AI product is approaching 15% of total ARR, or over $400M, with AI gross margins around 80% and nearly two-thirds of the 14,300+ paying customers having bought at least one AI product. KeyBanc noted non-GAAP opex growth of just 3.6% and incremental EBIT margin back above 40%, which is why free cash flow has been expanding faster than revenue. The read-through for Zoom is mildly negative — it slipped 0.3% while its larger rival rallied on AI monetization and margin leverage.
At the time of this announcement, RNG was trading at $84.75 on NYSE in the Technology sector, with a market capitalization of approximately $7.1B. The 52-week trading range was $24.14 to $98.14. This news item was assessed with positive market sentiment and an importance score of 7 out of 10. Source: Seeking Alpha.