Rosenblatt Securities has revised its price target for RingCentral (RNG, Financial), reducing it from $40 to $28. Despite this adjustment, analyst Catharine Trebnick maintains a Buy rating on the stock. The decision to lower the price target stems from reduced revenue forecasts for fiscal years 2025 and 2026, which are influenced by current economic uncertainties and recent changes in company leadership. Trebnick suggests that RingCentral remains an appealing option for investors willing to take a long-term view.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 17 analysts, the average target price for RingCentral Inc (RNG, Financial) is $34.65 with a high estimate of $45.00 and a low estimate of $25.00. The average target implies an upside of 47.37% from the current price of $23.51. More detailed estimate data can be found on the RingCentral Inc (RNG) Forecast page.
Based on the consensus recommendation from 19 brokerage firms, RingCentral Inc's (RNG, Financial) average brokerage recommendation is currently 2.7, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for RingCentral Inc (RNG, Financial) in one year is $42.50, suggesting a upside of 80.77% from the current price of $23.51. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the RingCentral Inc (RNG) Summary page.
RNG Key Business Developments
Release Date: February 20, 2025
- Total Revenue (Q4 2024): $615 million, up 8% year-over-year.
- Operating Margin (Q4 2024): 21.3%, above guidance.
- Free Cash Flow (Q4 2024): $112 million, a quarterly record.
- Total Revenue (Full Year 2024): $2.4 billion, up 9% year-over-year.
- Operating Margin (Full Year 2024): 21%, up from 19.1% in 2023.
- Free Cash Flow (Full Year 2024): $403 million, up 24% year-over-year.
- Subscription Gross Margin: 81%.
- Stock-Based Compensation (2024): 14% of revenue, down from 20% in 2020.
- Net Debt Leverage Ratio: Reduced to 2.2 from 2.6.
- Non-GAAP EPS Guidance (2025): $4.13 to $4.27, approximately 14% growth at the midpoint.
- Free Cash Flow Guidance (2025): $500 to $510 million, up 25% at the midpoint versus 2024.
- Subscription Revenue Growth Guidance (2025): 5% to 7% year-over-year.
- Total Revenue Growth Guidance (2025): 4% to 6% year-over-year.
- Operating Margin Guidance (2025): Approximately 22.5%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RingCentral Inc (RNG, Financial) reported Q4 total revenue of $615 million, exceeding guidance, with operating margins of 21.3%.
- The company achieved a quarterly record free cash flow of $112 million in Q4 and expects to generate half a billion dollars of levered free cash flow in 2025.
- RingCentral Inc (RNG) achieved positive GAAP operating profitability for the first time, with operating margins improving to 21% for the full year.
- The company's multi-product strategy is showing success, with new products like RingCentral CX and RingCentral events contributing to growth.
- RingCentral Inc (RNG) is leveraging AI to enhance its product offerings, including the introduction of RingCentral AI Receptionist, which aims to improve customer interactions and operational efficiency.
Negative Points
- Despite revenue growth, RingCentral Inc (RNG) faces challenges with aggressive pricing impacting top-line growth in the near term.
- The company is experiencing a decline in hardware sales, which affects total revenue, although it does not impact the bottom line significantly.
- RingCentral Inc (RNG) is dealing with currency headwinds, which have impacted financial results and guidance.
- There is a need for continued investment in AI and new product development, which could pressure margins if not managed carefully.
- The competitive landscape remains challenging, with persistent rhetoric about losing market share to competitors like Microsoft and Zoom.
