By Senad Karaahmetovic
RingCentral (NYSE:RNG) has its shares trade as much as 13% lower in premarket Thursday after the company’s forecast disappointed investors.
RingCentral posted EPS of $0.60 on revenue of $525 million to beat the analyst consensus of $0.59 on sales of $527.43M. Revenue increased 17% year-over-year while software subscription revenue jumped 19% to $501.6M, missing the consensus of $504.5M.
For this quarter, RNG sees EPS between $0.69 and $0.70 on revenue of $526M-$530M, which compares to the consensus for earnings of $0.62 per share on sales of $545M.
"We are in a select category of SaaS companies with over $2 billion of recurring revenue, and our Q4 results reflect our ability to deliver healthy growth and increasing profitability as we continue to scale," said Vlad Shmunis, RingCentral's founder, chairman, and CEO.
"We are executing well in the current environment given our product leadership, which provides customers with the market's leading UCaaS platform, as well as an integrated CCaaS solution."
Evercore ISI analysts downgraded RNG stock to In Line from Outperform with a $40 per share price target.
“While valuation at these levels would appear to be washed out, from our perspective there is no real catalyst on the horizon. While we applaud the focus on margins, CF, dilution, and addressing the convert, we don’t think it’s enough to offset the MSFT & ZM overhang which is not going away. In addition, we see a lot more risk over the next couple of quarters given CY23 is huge renewal year for RNG which creates a lot more uncertainty given the macro backdrop,” they wrote in a note.
Wolfe Research analysts added:
“We believe pricing pressure is likely to increase, which combined with RNG's seat-based model and low switching costs, suggest potential persistent headwinds to RNG’s growth. We reiterate our Peer Perform rating.”