IBD Stock of the Day RingCentral’s (RNG) expanding sales partner channel is giving the maker of business communications software a boost. Having doubled so far in 2019, RingCentral stock now is consolidating as investors look ahead to 2020 and growth driven by new deals with Avaya Holdings (AVYA) and AT&T (T).
Belmont, Calif.-based RingCentral sells cloud-based business communications software for workplace collaboration and customer support. The platform provides voice, chat, conferencing and application integration.
RingCentral stock surged Oct. 4 when it unveiled an alliance with Avaya, a longtime rival in the so-called “Unified Communications as a Service,” or “UCaaS,” market. Then RingCentral stock popped Nov. 5 on its third-quarter earnings report when it announced an expanded partnership with AT&T.
The one-two, Ayava-AT&T, punch led several analysts to upgrade RingCentral stock, which consolidated for four weeks after its third-quarter earnings pop.
The stock passed a test on Dec. 3 when it rebounded off its 50-day line. With a conventional entry point of 178.09, investors should pay attention if the stock climbs above its Dec. 3 high of 168. That could provide an opportunity to start a position. Shares dipped a fraction to close at 164.91 on the stock market today.
Business Communications Market Shifts To Cloud
The big picture is that RingCentral stock growth is tied to a shift in the business communications market to cloud-based products.
More companies are ditching decades-old internal calling centers and switching to cloud-based communications systems hosted in remote data centers. RingCentral customers access its services via high-speed internet connections.
“RingCentral is a leader in the unified communications as-a-service space and is benefiting from the secular shift to the cloud as well as the trend toward convergence in business communications,” William Blair analyst Bhavan Suri said in a recent report to clients.
That’s where the Avaya alliance comes in. Incumbents such as Avaya install and manage communications gear at customer locations. RingCentral will have the inside track to sell its remote, cloud-based products to Avaya’s large customer base.
RingCentral told analysts on its Nov. 5 earnings call that an Avaya-branded product should launch in the first quarter of 2020. A revenue boost from the Avaya deal should kick in during late 2020 and more so in 2021, RingCentral said.
RingCentral Stock: AT&T Partnership Provides Global Network
Meanwhile, AT&T will market a business communication product supported by RingCentral. Further, the two companies will jointly develop global capabilities — a key feature for multinational companies.
The Avaya and AT&T deals are just two examples of RingCentral’s growing partner network. It also has deals with British Telecom, Fujitsu, Synnex, and Westcon.
“We believe partners increasingly engaging with RingCentral is a direct reflection of the strength of the platform and customer interest,” Jefferies analyst Samad Samana said in his note to clients.
Competition among cloud vendors has intensified in the business communications market. RingCentral competes with 8×8 (EGHT), Fuze, Vonage Holdings (VG), Five9 (FIVN) and others. Zoom Video Communications (ZM) also looms as a new rival as it ramps up a new phone product, analysts say.
RingCentral Chief Executive Vlad Shmunis says the company maintains a startup’s mentality as it fights for market share.
Author: Reinhardt Krause
Source: Investors: RingCentral Stock Gets Boost From Cloud Shift, Avaya, AT&T Deals