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Investing.com - RingCentral (NYSE:RNG) shares jumped 11% in after-hours trading following the company’s solid second-quarter 2025 results, which exceeded analyst expectations in key metrics. According to InvestingPro analysis, the company appears undervalued at current levels, with a "GOOD" overall financial health score despite recent market volatility.
Goldman Sachs reiterated its Neutral rating and $30 price target on RingCentral, noting the company reported subscription revenue 0.2% above consensus, operating margin 30 basis points higher than expected, and free cash flow 400 basis points above forecasts. The company maintains a strong free cash flow yield of 24%, with revenue growing at 7.8% year-over-year.
The stock’s after-hours surge likely stems from several positive developments, including a renewed partnership agreement with NiCE InContact, which Goldman Sachs estimates represents approximately $400 million in contact center as a service annual recurring revenue.
RingCentral also increased its free cash flow growth expectations, projecting 28% growth for fiscal year 2025 compared to 24% in fiscal year 2024, and reported solid momentum in its small and medium-sized business segment, with over $1 billion in annual recurring revenue growing at double-digit rates.
Despite these positive developments, Goldman Sachs highlighted ongoing concerns about the company’s overall business deceleration in both revenue and annual recurring revenue, particularly noting the disconnect between strong small business performance and enterprise annual recurring revenue growth of approximately 5%, which raises competitive concerns against rivals like Zoom (NASDAQ:ZM) and Microsoft (NASDAQ:MSFT). Analyst consensus remains cautiously optimistic, with targets ranging from $24 to $55 per share. For deeper insights into RingCentral’s competitive position and growth prospects, access the comprehensive Pro Research Report available on InvestingPro, which includes 12 additional exclusive ProTips and detailed financial analysis.
In other recent news, RingCentral has reported its second-quarter 2025 earnings, surpassing Wall Street expectations with an earnings per share of $1.06, compared to the forecasted $1.02. The company’s revenue also exceeded projections, reaching $620 million against a forecast of $617.85 million. Following these results, RingCentral’s management has raised its fiscal year 2025 earnings per share and free cash flow guidance by 100-150 basis points. In light of this strong financial performance, Oppenheimer upgraded RingCentral’s stock from Perform to Outperform, setting a price target of $35.00. These developments highlight RingCentral’s solid financial footing and its potential for continued growth. Despite the positive earnings news, it’s noted that RingCentral’s stock experienced a slight decline in after-hours trading.
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