RingCentral, Inc. (NYSE:RNG) was upgraded to Buy from Hold at Needham & Company on Friday, with analysts assigning the stock a $42 price target.
The analysts said the firm is upgrading the stock based on a "vastly improved" free cash flow and stabilizing growth.
"We upgrade RNG to Buy after nearly a year on the sidelines in response to surgical cost cuts and stabilized growth," wrote the analysts.
"We now see the company demonstrating its capacity to achieve 20%+ OM which should provide ample FCF to pay down its sizable debt load. We estimate ~$300MM/ $375MM in C24/C25 FCF with its new debt instruments as capable of negating total debt in 2026," they added.
Needham & Company expect "slowing UCaaS growth to focus RNG on low knowledge worker verticals where Teams is less prevalent," while with an expanding CCaaS portfolio, they see sustained 10%+ subscription revenue growth as achievable over the medium term.
"Fears of declining business lines appear overblown, and the company's early-mover strategy in AI, albeit immature in monetization, provides upside optionality. Our $42 PT is based on F24 EV/EBITDA of 10x, still below peers," the analysts concluded.