RingCentral (NYSE: RNG) stock has plunged about 81% in one year. While RingCentral continued to deliver solid financials, competition from prominent players weighed on its stock.
RNG offers a cloud-based communications platform and services. It faces competition from traditional on-premise hardware-based service providers like Cisco Systems (NASDAQ: CSCO). Moreover, it also competes with companies like Microsoft (NASDAQ: MSFT) and Zoom Video Communications (NASDAQ: ZM).
Citing increased competition, Needham analyst Ryan Koontz downgraded RNG stock to Hold. Following the downgrade, RNG stock closed 9.7% lower on Wednesday.
Koontz stated, “Spurred by the pandemic to initially enable video collaboration, we believe Microsoft Teams’ still growing footprint in the enterprise and its ability to up-sell integrated voice represents the most significant threat to RNG achieving or exceeding consensus revenue growth of 26%/24% in C2022/C2023.”
Besides competition, executive churn is a concern, highlighted Koontz. The analyst said, “We believe senior management changes at RNG have set back strategic efforts to respond to competitive threats and revisions to product and company strategy.”
Last year, RNG announced executive leadership changes. Anand Eswaran stepped down from the role of President and COO (Chief Operating Officer). Moreover, during the Q1 conference call, the company announced the appointment of Sonalee Parekh as the CFO (Chief Financial Officer) and Mo Katibeh, the current COO, as the President.
While Koontz remains sidelined, most analysts are bullish about RNG stock. It has received 15 Buys and four Hold recommendations for a Strong Buy rating consensus. Further, the average RingCentral price target of $118.72 implies 114.45% upside potential.
Bottom Line
While increased competition and executive churn are a concern, RNG’s management is confident about generating sustainable profitability and strong cash flows in the coming years.
Its average revenue per user and subscription gross margins have remained stable. Further, its annual recurring revenues have consistently increased.
A hybrid work environment, integrated solutions, investments in growth initiatives, and strategic partnerships with carriers and resellers could support its growth.
