2023-05-26 10:05:26 ET
RingCentral ( NYSE: RNG ) shares rose 3% on Friday as Needham upgraded the software company, citing stabilizing growth and improved free cash flow.
Analyst Ryan Koontz raised his rating on RingCentral ( RNG ) shares to buy from hold, noting that the company has made "surgical" cost cuts and stabilized its growth rates.
"We now see the company demonstrating its capacity to achieve 20%+ [operating margins] which should provide ample [free cash flow] to pay down its sizable debt load," Koontz wrote. "We estimate ~$300MM/$375MM in [calendar 2024 and 2025 free cash flow] with its new debt instruments as capable of negating total debt in 2026."
Koontz noted that he expects slowing unified-communications-as-a-service growth to allow RingCentral ( RNG ) to go after "low knowledge worker verticals" where Microsoft's ( MSFT ) Teams is less prevalent.
"Together with an expanding CCaaS portfolio, we see sustained 10%+ subscription revenue growth as achievable over the medium term," Koontz added. "Fears of declining business lines appear overblown, and the company's early-mover strategy in AI, albeit immature in monetization, provides upside optionality."
Analysts are largely cautious on RingCentral ( RNG ). It has a HOLD rating from Seeking Alpha authors , while Wall Street analysts rate it a BUY . Conversely, Seeking Alpha's quant system, which consistently beats the market, rates RNG a HOLD .
More on RingCentral
- RingCentral repurchases ~$461M senior notes
- Shell Asset boosts stake in AT&T, reduces Huntington Bancshares, Arch Capital
- Goldman Sachs downgrades Twilio, other software names on 'limited catalyst' path
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Needham upgrades RingCentral, citing stabilizing growth, improved cash flow