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Investing.com -- Oppenheimer upgraded RingCentral (NYSE:RNG) to Outperform from Perform, citing stronger execution, improving fundamentals, and an “attractive” valuation, with shares trading near five-year lows and offering a free cash flow yield above 20%.
The firm raised its price target to $35 after the company delivered better-than-expected second-quarter results and lifted its full-year EPS and free cash flow guidance by 100 to 150 basis points.
Subscription revenue rose 5.6% year-on-year while total revenue grew 4.6% to $620.4 million. Free cash flow surged 32.7% to $144.4 million, with a margin of 23.3%, a company record.
Non-GAAP operating margins expanded by 160 basis points to 22.6%, exceeding guidance. Stock-based compensation fell sharply as a share of revenue, down 440 basis points to 10.2%.
Oppenheimer pointed to momentum across RingCentral’s AI-enhanced product portfolio, with customer count tripling for its AI Receptionist and growing across other offerings like RingSense and RingCX.
The brokerage also cited improved operating discipline, lower stock compensation, and renewed confidence in the company’s ability to expand margins by 50–100 basis points annually.
The upgrade comes after a two-year neutral stance due to macro pressure and concerns over free cash flow conversion and increased competition. Those headwinds now appear to be easing, Oppenheimer said.
The firm expects RingCentral to double free cash flow per share over the next five years, supporting shareholder returns through buybacks and debt reduction.