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.