These Analysts Remain RingCentral Bulls

RingCentral, Inc. RNG reported fourth-quarter results Monday, which prompted Oppenheimer and Raymond James to turn incrementally bullish on the stock.

The Analysts

Oppenheimer's Brian Schwartz maintains an Outperform rating on RingCentral with a price target lifted from $101 to $117.

Raymond James' Brian Peterson maintains at Strong Buy, price target lifted from $98 to $116.

Shares of RingCentral hit a new 52-week high of $109.64 Tuesday and traded around $103.98 Wednesday afternoon.

Oppenheimer: The Positives And Negatives

RingCentral's fourth-quarter report contains some positive readouts and negative takeaways, Schwartz said in a research report.

On the positive end, the quarter marks the highest upside in revenue growth and absolute dollars in 10 quarters. The company secured a record high total contract value deal of at least $10 million in the education sector. Customer retention reached a record high of more than 90 percent.

On the other hand, revenue and subscription revenue guidance suggests slowing growth in the back half of 2019 although this could be conservative. Billings revenue growth slowed and management expects to see less margin improvements in 2019.

Despite some negative takeaways in the quarter, Schwartz said management continues to execute on initiatives which were detailed to investors last year. The company's continued category leadership, large total addressable market and rising productivity support an incremental bullish stance on the stock.

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Raymond James: Another Beat And Raise Report

RingCentral's earnings beat was highlighted by 34 percent growth in total revenue to $188.6 million, Peterson said. The company benefited from continued momentum across key growth channels like enterprise where annual recurring revenue rose 99 percent from last year and channel partners saw more than 80 percent growth. Encouragingly, both segments showed a churn rate that was roughly half of the corporate average.

Deal sizes were also strong in the quarter with the channel partner business contributing more than 70 percent of all million dollar-plus deals. The analyst's checks suggest this can be sustained with channel sales expected to grow at twice the rate of the company average for at least the near-term.

The research firm's revised $116 price target is based on nine times 2020 revenue estimate and a slight premium to peers showing 20 to 30 percent growth at eight times. The premium multiple is justified given RingCentral's leadership position within the $50 billion market.