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RingCentral, Inc. Well-Positioned to Increase Profitability - BofA

Published 10/17/2022, 12:49 PM
Updated 10/17/2022, 12:58 PM
© Reuters.  RingCentral, Inc. (RNG) Well-Positioned to Increase Profitability - BofA
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By Sam Boughedda

BofA analysts said in a note to clients on Monday that RingCentral, Inc. (NYSE:RNG) has room to cut expenses and increase profitability. They currently have a Buy rating on the stock but cut the price target to $90 per share from $110.

They told investors that the firm believes RingCentral is well-positioned to reduce expenses and increase profitability while maintaining healthy revenue growth.

Despite declining over 81% in 2022, RingCentral shares gained over 7% Monday.

"Based on investor conversations we believe the RNG bear case is based, in part, on the view that RNG has a principal/agent problem. We believe a right sizing of expenses could be good for RNG equity value as markets currently favor shorter duration equity stories over out-year free cash flow promises," explained the analysts.

Recent management changes and commentary support BofA's view that RingCentral could take a fresh look at expense ratios and spending priorities claimed BofA.

"We reiterate our Buy rating, lowering our PO to $90 (from $110) based on a target EV/Revenue multiple of 4.2x (prior 4.9x) our CY23 estimate. We lower our target multiple based on continued multiple compression across the software and UCaaS peer group," the analysts stated.

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