After reporting consistent quarter-over-quarter growth for the last 30 quarters, RingCentral (NYSE:RNG) increased its sales guidance once again in the last quarterly earnings call. With this in mind as well as my optimistic FCF forecasts, I believe
RingCentral Is A Buy, And Short Sellers Don't Get It
Summary
- The company’s RingCentral Video, which was launched in April 2020, offers more than 250 features, including waiting rooms, virtual backgrounds, live switching between devices, and many more capabilities.
- Contrary to the pessimistic vision from short-sellers, the management increased its 2021 outlook. The company is expecting sales growth of 30%-31% and operating margins of 10%-10.1%.
- I also assumed FCF/Sales of 9%-10% from 2023 to 2025 and capital expenditures of $154-$273 million. In sum, I obtained a free cash flow forecast of $90-$350 million from 2021.
- RingCentral, Inc. could be worth more than $400 per share. I used the guidance given for the year 2021, which includes the sales growth of 31%. I also added FCF/Sales of 9%.
- With a WACC of 5% and a terminal FCF of $450, I obtained a fair price of $415, which makes RingCentral quite an undervalued company at $250 per share.
I am an financial advisor living in Europe. I conduct due diligence for clients across multiple sectors. I hold more than 15 years of expertise.I only write about my opinion. Investing in securities involves risk of loss that readers should be prepared to bear. No investment process is free of risk; no strategy or risk management technique can guarantee returns or eliminate risk in any market environment.
Analyst’s Disclosure:I/we have a beneficial long position in the shares of RNG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.