Ring Central Falls After-Hours Despite Stellar Q2 Results

Shares in cloud communications company RingCentral (RNG) pulled back in Monday’s after-hours trading despite delivering impressive second quarter earning results.

Specifically, Q2 Non-GAAP EPS of $0.24 beat Street estimates by $0.04 while GAAP EPS of $0.01 also topped Street forecasts by $0.48. Plus revenue of $278M beat by $14.22M- and represented strong year-over-year growth of 29%.

Subscriptions revenue also increased 32% year over year to $257 million and Total Annualized Exit Monthly Recurring Subscriptions (ARR) increased 33% year over year to $1.1 billion.

“We delivered solid Q2 results driven again by strong contributions from mid-market and enterprise customers, as well as our channel partners,” cheered Vlad Shmunis, RingCentral’s CEO. “We are seeing a high level of adoption and engagement with our Message Video Phone (MVP) solution as businesses adapt to a work from anywhere environment.”

Looking forward, RNG issued robust guidance for the third quarter with 3Q total revenue of $283.5–289.5M (+21% to +24% y/y) which fell above the $283M consensus estimate. Guidance for subscriber revenue of $263–265M (+25% to +26% y/y) beat the $260M consensus estimate with PF operating margin of 10.0–10.2% is and PF EPS of $0.24.

For the full year, RNG raised total revenue range to $1.135 to $1.143B, representing annual growth of 26% to 27%. This is up from its prior range of $1.116 to $1.125B and annual growth of 24% to 25%.

Overall the stock shows a bullish Strong Buy Street consensus with an average analyst price target of $306. With shares up a whopping 80% year-to-date, the price target now lies flat with the current share price.

Following the report Oppenheimer analyst Brian Schwartz reiterated his buy rating on the stock with a price target of $330. “The quarter displayed record new customer adds and big deals ($1M+ TCV), and robust ARR growth, channel demand, and cash flow” he told investors.

“Negatively, guidance implies some growth deceleration in the 2H:2020, but we advise investors to look through it given the strengthening fundamentals and with the near-term estimates mostly de-risked” he wrote, adding that work-from-home is only part of a multi-year secular growth driver in cloud business communications. (See RNG stock analysis on TipRanks).

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