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Will RingCentral’s share price continue its impressive gains?

RingCentral’s [RNG] share price has been a notable success story over the last couple of years, climbing from $77.40 at the start of 2019, to an all-time high of $405.46 on 24 December last year – an astronomical rise of 423.85%. The US cloud-communication firm’s shares have dropped back a little since then, sliding 8.72% to close at $372.94 on 19 January, but could new highs be around the corner? 

RingCentral has certainly started the year with a wave of activity, including the bolstering of its leadership team with the key, experienced appointments of new chief information security officer, Heather Hinton from IBM [IBM], and chief marketing officer, Jaya Kumar. RingCentral has also expanded its partnership with Canadian telecommunications firm TELUS [T]. It’s clear the company is not resting on its laurels, and that ought to bode well for the long-term outlook of RingCentral’s share price. 

 

 

RingCentral-TELUS deal expands customer reach 

RingCentral’s new partnership with TELUS, announced last week, broadens its offering to help provide solutions for even more companies. Their goal is to enable small Canadian businesses to transition legacy phone systems to the cloud, via TELUS Business Connect, an all-in-one communications solution for message, video and phone. For small businesses planning to adopt a unified communications as a service (UCaaS) solution, it is a first step towards total cloud communications infrastructure.

"Our mission at RingCentral is to provide every business with the cloud communications technology they need to empower their people to work from anywhere. Small businesses are critical to the economy and by working together with TELUS, we will ensure these businesses have access to the very best communications services and capabilities along with strong security and reliability, ensuring they can quickly transition to the cloud." said vice president of service providers, Sandra Krief. 

 

"Small businesses are critical to the economy and by working together with TELUS, we will ensure these businesses have access to the very best communications services and capabilities along with strong security and reliability" - Sandra Krief, RingCentral

 

The announcement initially helped push RingCentral’s share price up 1.15% from $388.99 at the open to $393.49, before the shares fell away to close lower on the day at $387.80. However, the deal’s benefits should boost the company’s prospects over the medium term and beyond. 

 

Is RingCentral set to continue its positive earnings run?

With a history of surpassing earnings estimates, RingCentral has the potential to produce another earnings beat and maintain this trend, according to Zacks. The company has topped estimates by 14.17% on average in the last two quarters, continuing a theme from the two quarters prior to that.

In its most recent quarter, RingCentral was expected to post earnings per share of $0.24, before surpassing that with EPS at $0.26 — a hike of 8.33%. In the previous quarter, RingCentral posted an EPS beat of 20% over the consensus estimate, at $0.24 versus expectations for $0.20.

Zacks calculates an expected surprise prediction of +1.74%, indicating that analysts are bullish on the company's earnings prospects. This, combined with Zacks’ own hold recommendation, could see RingCentral’s share price get a boost if the next earnings update, likely to be held next month, continues this positive trend and outperforms estimates again. 

 

Where next for RingCentral’s share price?

Among the 24 analysts tracking the stock on the Wall Street Journal, RingCentral’s share price has an average price target of $382.42, with a high target at $451.00 and a low target of $315.00. Hitting the average target would represent a modest 2.54% upside on RingCentral’s share price (through 19 January’s close).

Of the 27 analysts offering recommendations on RingCentral, an overwhelming majority of 24 rate the stock a buy, with just one underweight and two overweight ratings respectively. This equates to a clear buy consensus rating. With the upgrade of its TELUS partnership and the potential that brings, plus a record of beating EPS estimates and underlined by a comprehensive buy consensus rating, RingCentral’s share price may well be one to watch.

 

Market cap $34.281bn
Operating margin (TTM) -8.36%
EPS (TTM) -1.22
Quarterly revenue growth (YoY) 30.10%

RingCentral's share price vitals, Yahoo Finance, 20 January 2021

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