RingCentral Shows Positive Trends, Trajectory Looks Strong

Oppenheimer maintained his Outperform rating on RingCentral Inc 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.