What Happened:
Shares of office and call centre communications software provider RingCentral (NYSE:RNG) jumped 15.7% in the after-market session after the company reported first quarter results that beat analysts' billings, revenue and EPS expectations. Its gross margin improved and free cash flow was solid. Looking ahead, revenue guidance for the next quarter came in roughly inline with Wall Street's expectations. Zooming out, we think this was a decent quarter, showing that the company is staying on target.
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What is the market telling us:
RingCentral's shares are very volatile and over the last year have had 24 moves greater than 5%. But moves this big are very rare even for RingCentral and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 12 months ago, when the stock gained 11.1% on the news that the company reported an encouraging "beat and raise" quarter. First-quarter revenue, adjusted EBITDA, free cash flow, and earnings per share (EPS) all beat Consensus estimates. Revenue guidance for the next quarter and the full year came in roughly inline with Consensus. On a more positive note, EPS guidance for the next quarter exceeded expectations, and the company raised the full-year EPS guidance. Overall, it was a solid quarter for the company especially considering the mixed results of peers and macro uncertainty.
RingCentral is up 5.3% since the beginning of the year, but at $34.30 per share it is still trading 20.1% below its 52-week high of $42.90 from July 2023. Investors who bought $1,000 worth of RingCentral's shares 5 years ago would now be looking at an investment worth $290.47.
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