The Baird analysts, William V. Power and Charles Erlikh, believe the risk-reward is now fair and the most likely M&A upside could be $44. Without M&A, they see the fair value at $41, which is a slight premium to the SaaS group. They are positive on the operating momentum and long-term positioning.
Bloomberg reported Wednesday morning that RingCentral is working with advisors to consider an offer for the company and the Baird analysts believe that any larger cloud company could be a buyer. They named Alphabet Inc GOOG GOOGL, Oracle Corporation ORCL and Amazon.com, Inc. AMZN as potential candidates.
Related Link: Benzinga's Top Upgrades, Downgrades For August 10, 2017
The $41 price target is based on 5.5 multiple of 2018 software revenue forecast, which is slightly above the sector, while the $44 price target is based on 6multiple of 2018 software revenue forecast. The 6 multiple puts the company in line with high growth SaaS group. The Baird Equity Research analysts believe the stock could drop to mid-30 levels, if the M&A doesn't happen. They see other potential M&A targets in 8x8, Inc. EGHT and Vonage Holdings Corp. VG.
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