RingCentral Shows Positive Trends, Trajectory Looks Strong

Oppenheimer maintained his Outperform rating on RingCentral Inc (NYSE: RNG) saying that the company's positive operating trends in the second quarter suggests that the business is on a strong trajectory.

For the second quarter, PF total revenue of $91.8 million was about $4.3 million above consensus, and PF EPS of $0.02 was a penny better than consensus.

"The good results should support an attractive RNG story of sustainable above-SaaS-industry-growth with improving operating profits driven by share gains from enabling business communications in the cloud," analyst Brian Schwartz wrote in a note.

Looking ahead to the third quarter, RingCentral guided PF total revenue of $95-$97 million (+28-30 percent year-over-year) is above the $92.1 million consensus, and PF EPS guidance of $0.00-$0.02 compares to the $0.01 consensus.

The company also raised its 2016 total PF revenue guidance to $370-$375 million, from $359 million - $367 million, and is above the $364 million consensus estimate. In addition, PF EPS guidance is raised by $0.01 to $0.04 - $0.08, and the midpoint is above the $0.05 consensus.

To reflect the second quarter results and the company's improved guidance, the analyst also increased his estimates across the board. Further, Schwartz increased his price target to $29 from $27.

"Our Outperform rating is based on RingCentral's fast-growing, profitable, and stable UCaaS business, its large market opportunity, good possibilities for further operating leverage, and discount valuation," Schwartz added.

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