RingCentral Inc. (RNG) has shown steady growth in 2020, gaining momentum following a brief dip in March. The stock has significantly outperformed the S&P 500, rising by approximately 129.8% compared to the S&P’s gain of about 15.2%. The communication services company has seen a profitable year and rose in ranking on the WhaleWisdom Heatmap to 18 from 32.
RingCentral offers cloud-based internet and telephone communication services with collaboration solutions for mobile and distributed businesses. While many companies had experienced setbacks during the coronavirus, especially when government lockdowns around March impacted so many business sectors. RingCentral has been able to pivot and actually benefit from increased sales during the pandemic.
Hedge Funds Are Buying
RingCentral saw hedge fund managers and institutions buying, though overall institution ownership was down slightly by 0.1%. Looking at activity by the top hedge funds in the second quarter, the aggregate 13F shares held increased to about 23.9 million from 23.1 million, an increase of approximately 3.5%. Of the hedge funds, 23 created new positions, 54 added to existing holdings, 25 exited, and 49 reduced their position. With aggregate holdings increasing by about 1.1% to approximately 77.4 million from 76.5 million, institutions were also buying.
Favorable Multi-year Estimates
Analysts expect to see revenue grow rather consistently from 2020 through to 2023, ranging from 23.1% to 30.2% year over year growth. Between December 2020 and 2023, revenue is anticipated to grow to approximately $2.3 billion from $1.2 billion. Earnings estimates are also very optimistic, with year-over-year estimated increases that would bring earnings to $2.15 per share in 2023, up from $0.96 in 2020.
Positive Outlooks from Analysts
Investment firms have responded positively to RingCentral’s new partnership with Vodafone. RingCentral’s services will match nicely with Vodafone’s mobile expertise. Morgan Stanley’s analyst, Meta Marshall, favors the deal, noting that the legacy Unified Communications market was underpenetrated. Marshall gave the stock a $420 price target, up from $300. Marshall initially rated the stock Equal-weight and then later upgraded to an Overweight rating. Raymond James Financial, Inc. raised the stock’s price target to $450 from $355, maintaining a Strong Buy rating.
RingCentral’s impressive 2020 growth is certainly encouraging for investors, especially after a rough start to the year near the beginning of the pandemic. The company also appears well-positioned to continue to respond to the pandemic and act upon increased demand for its services, especially given Vodafone’s partnership. Analysts’ ratings and multi-year estimates speak to the stock’s promise, offering investors an attractive opportunity.