RingCentral Inc: Up 114% in 2019 & Looks Even More Bullish on New Deal

RingCentral Inc Up 114% on Strong Financials and New Agreement

RingCentral Inc Soars on New Deal and Analyst Upgrade

RingCentral Inc (NYSE:RNG) was having a great year even before it announced a new alliance with Avaya Holdings Corp (NYSE:AVYA) in early October. By the end of September, RingCentral stock had already advanced 51%.

Since the company announced the agreement with Avaya, RingCentral’s share price has soared by an additional 40%+. Currently trading at $175.15, RNG stock is up approximately 120% year-to-date.

RingCentral stock also got a boost after JPMorgan Chase & Co. (NYSE:JPM) upped the stock’s rating from “Neutral” to “Overweight,” with a higher share-price target.

Investors have also been more than pleased with the company’s quarterly results. In the second quarter, RingCentral reported better-than-expected results and raised its full-year guidance.

RNG Stock Overview

RingCentral Inc is a leading provider of cloud-based software-as-a-service (SaaS) communications, collaboration, and contact center solutions.  The company provides voice, video meetings, team messaging, digital customer engagement, and integrated contact center solutions to more than 350,000 businesses around the world. (Source: “Why RingCentral,” RingCentral Inc., last accessed October 8, 2019.)

RNG Stock Information

Market Cap $14.6 Billion
52-Week Change 110.2%
52-Week High $177.99
52-Week Low $64.41
Shares Outstanding 71.8 Million
Float 70.7 Million
50-Day Moving Average $136.13
200-Day Moving Average $123.69

(Source: “RingCentral, Inc. (RNG),” Yahoo! Finance, last accessed October 9, 2019.)

RingCentral stock has been trending steadily higher in 2019. The share price popped in late July after the company reported second-quarter results that topped Wall Street expectations.

RNG stock also got a massive boost when it announced the aforementioned exclusive partnership with Avaya Holdings.

That announcement resulted in JPMorgan increasing its guidance for RingCentral from $143.00 per share to $225.00. That’s 28% higher than the current share price. (Source: “Buy RingCentral Stock Because Its Deal With Avaya Could Add $82 a Share, Analyst Says,” Barron’s, October 7, 2019.)

Chart courtesy of StockCharts.com

Chances are good that RingCentral stock will experience a short-term pullback on profit-taking. That said, its long-term outlook remains exceptionally strong.

Strategic Partnership With Avaya Holdings Corp

On October 3, RingCentral announced that it entered into an exclusive partnership with Avaya Holdings, wherein RingCentral provides unified communications as a service (UCaaS) solutions. (Source: “RingCentral to Become Exclusive Provider of UCaaS Solutions to Avaya in Strategic Partnership,” RingCentral Inc, October 3, 2019.)

Avaya will resell RingCentral’s services under the “Avaya Cloud Office by RingCentral” banner.

The deal makes RingCentral’s cloud-based products available to Avaya’s more than 100 million users and 4,700+ partners. RingCentral also acquired six percent stake in Avaya.

Strong Second-Quarter Results

At the end of July, RingCentral Inc announced its financial results for the second quarter ended June 30. Second-quarter revenue jumped 34% year-over-year to $215.0 million. (Source: “RingCentral Announces Second Quarter 2019 Results,” RingCentral Inc, July 29, 2019.)

Wall Street was only looking for revenue to increase by five percent.

RingCentral Inc reported a second-quarter net loss of $9.2 million, or $0.11 per share, versus a loss of $8.3 million, or $0.10 per share in the same period last year.

Adjusted earnings for the second quarter were $0.21, compared to $0.19 per share in the second quarter of 2018. Analysts were expecting RingCentral to report adjusted earnings of $0.16 per diluted share.

The company ended the second quarter with cash and cash equivalents of $568.0 million. At the end of the first quarter, the company had $549.0 million in cash and equivalents.

Because of the strong first half of 2019, RingCentral raised its full-year revenue guidance to the range of $874.0 to $877.0 million, up from a previous guidance range of $862.0 to $866.0 million. This represents a year-over-year growth of 30%.

The company also raised its adjusted earnings-per-share estimate to the range of $0.77 to $0.79, up from the previous range of $0.71 to $0.75.

For the third quarter, RingCentral expects to report revenue in the range of $220.0 to $222.0 million, representing an annual growth of 27% to 28%. Third-quarter adjusted earnings are forecast to be in the range of $0.18 to $0.20.

Analyst Take

RingCentral Inc was having a great year even before it announced a new strategic partnership with Avaya Holdings Corp. The new agreement helps accelerate RingCentral’s international reach, enhances top-line growth, and creates new drivers for short- and long-term growth.

Furthermore, the company reported solid first- and second-quarter results and raised its full-year guidance.

The tech sector has been volatile as of late, but RingCentral stock’s outlook for 2019 and 2020 is more robust than ever.