RingCentral Reports Strong Q2 Results, Lifts Guidance

Shares of cloud communications company RingCentral (RNG) rallied 2.6% in the extended trading session on Tuesday to close at $276.84 after it posted upbeat Q2 results. The company has surpassed the Street’s expectations in terms of revenue and earnings.

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Adjusted earnings of $0.32 per share, surpassed analysts expectations of $0.28 per share. Also, it compares favorably with $0.24 recorded in the same quarter last year.

Revenues jumped 36.4% from the year-ago period to $379.3 million, beating estimates of $359.5 billion. Its subscriptions revenue, which accounted for 93% of the total revenues, rose 36.6% year-over-year to over $351.2 million.

RingCentral reported total annualized exit monthly recurring subscriptions (ARR) of $1.5 billion, up 37% year-over-year. (See RingCentral stock charts on TipRanks)

Guidance Lifted

For FY21, RingCentral expects total revenues to be in the range of $1.54-1.55 billion, up from $1.5-1.51 billion previously guided. The company has also raised its guidance for subscriptions revenue to $1.42 to $1.43 billion from $1.39 to $1.4 billion.

It expects to report adjusted earnings of $1.28 to $1.30, up from earlier guidance of $1.24 to $1.27.

For the third quarter, total revenues are expected to be between $390.5 and $393.5 million, with subscriptions revenue in the range of $363 to $365 million. Adjusted EPS is likely to be $0.33 to $0.34.

Analysts Remain Bullish

Following the release, William Blair analyst Bhavan Suri reiterated a Buy rating on the stock. Suri noted, “We continue to believe that the global PBX replacement market has reached an inflection point in the pace of cloud adoption and expect solid momentum in the company’s business to persist in the coming quarters.”

He added, “We believe that RingCentral, as the market leader, is well-positioned to provide value to customers as the spending environment continues to normalize in the quarters ahead.”

Consensus among analysts is a Strong Buy based on 13 Buys and 2 Holds. The average RingCentral price target stands at $410, implying 51.9% upside potential from current levels.

TipRanks data shows that financial blogger opinions are 100% Bullish on RNG, compared to the sector average of 70%.