What happened
Shares of RingCentral (RNG 2.75%) had a banner day on Thursday. The stock rose as much as 36.3% in the morning, backing down to a still-impressive 29.5% gain at 1:20 p.m. ET today. The cloud-based communications-services expert beat analyst estimates in last night's third-quarter report, followed by bullish guidance for the full fiscal year.
So what
RingCentral's third-quarter revenue rose 23% year over year to $509 million. Subscription sales accounted for 95% of the total revenue stream, up from 93% in the year-ago period. Adjusted operating margins widened, larger accounts represented a greater percentage of the customer mix, and adjusted earnings increased from $0.35 to $0.55 per diluted share.
Your average analyst would have settled for earnings of roughly $0.50 per share and sales near $503 million. RingCentral's full-year earnings guidance also exceeded the current analyst view, while the midpoint of the yearly revenue target was in line with Wall Street's projections.
NYSE: RNG
Key Data Points
Now what
The company offers a full portfolio of voice, video, messaging, and call-center solutions, all based on a unified cloud computing model. RingCentral's tools can match or beat rival offerings from tech giants with much greater financial resources and market reach. As a result, the company is winning market share in a highly competitive sector during an economic crisis.
At the same time, investors had essentially left the stock for dead before this report. Even now, including Thursday's impressive price pop, the stock has lost 81% of its value in 2022. And you don't have to worry about the stock being overpriced at this point: Shares are changing hands at the modest valuation of 16 times free cash flow or 11.5 times forward earnings. So it's not too late to grab some RingCentral shares at a great price if you believe in the company's long-term business prospects.
