Rosenblatt downgraded RingCentral, Inc. (NYSE:RNG) to a Neutral rating (from Buy) and cut their 12-month price target on the stock to $35.00 (from $52.00) following the communications company’s recent shift in leadership.
Analysts at Rosenblatt believe the recent change-up could lead to a resetting of revenue expectations, while a competitive landscape adds further concern.
Analysts wrote in a note, “We applaud RingCentral's new products (RingSense and RingCX), its expansion into India and Portugal, and the recently launched AWS partnership, but we expect it will take 4 to 6 quarters for these initiatives to have a meaningful impact.”
The company’s new CEO, Tarek Robbiati, is expected to scale down the company's channel team and leverage more go-to-market motion and lead generation from its partners. Analysts believe these changes will boost the company's operating margin by reducing sales, marketing, and G&A expenses.
Analysts’ revenue estimates for the third quarter remain unchanged at 8.8% year-over-year growth, in line with Street estimates. For the full year 2023, analysts reduced their revenue forecast to $2.195 billion (down from $2.201 billion), which is slightly below the Street estimate of 10.5% year-over-year growth.
For fiscal year 2024, analysts forecast a conservative revenue growth of 9.3% year-over-year (down from 11.5% year-over-year), below the street’s 10.3% estimate.
Shares of RNG are down 3.99% in pre-market trading Monday morning.