Is RingCentral (RNG) Still a Great Long-Term Buy?

RiverPark Funds, an investment management firm, published its “RiverPark Large Growth Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. The RiverPark Large Growth Fund (the “Fund”) returned -3.23% for the third quarter of 2021, while its benchmarks, the S&P 500 Total Return Index (“S&P”) advanced 0.58%, the Russell 1000 Growth Total Return Index (“RLG”) returned 1.16%, while the Morningstar Large Growth Category returned -0.07%. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

RiverPark Large Growth Fund, in its Q3 2021 investor letter, mentioned  RingCentral, Inc. (NYSE: RNG) and discussed its stance on the firm. RingCentral, Inc. is a Belmont, California-based cloud communications solutions provider with a $20.7 billion market capitalization. RNG delivered a -41.40% return since the beginning of the year, while its 12-month returns are down by -25.24%. The stock closed at $222.08 per share on November 29, 2021.

Here is what RiverPark Large Growth Fund has to say about RingCentral, Inc.  in its Q3 2021 investor letter:

“Despite strong second quarter results, RNG shares sold off on concerns of increased competition from Zoom and Microsoft. We believe RingCentral’s partnerships, including with Avaya, Atos, Alcatel, and Vodafone, provide a sales advantage to help drive 30%+ revenue growth for the next five years. For its 2Q21, RNG reported key metrics above its high-end of guidance—subscription revenue grew 37%, annual recurring revenue growth accelerated to 41%, total revenue grew 36% and RNG’s 10.2% Non-GAAP Operating margin exceeded guidance by 90 basis points. Management also again raised 2021 subscription revenue growth guidance to 31%-32%.

RingCentral is the largest and fastest growing pure play Unified Communications as a Service (UCaaS) vendor. Traditionally, business communications have been comprised of on-premises hardware-based private branch exchanges (PBX), which primarily support voice-only desktop phones. These systems do not support employees who now communicate from anywhere with any device, using voice, video, text, messaging, and social media. UCaaS encompasses solutions addressing all these needs in a capital and labor light model for customers. RNG is the UCaaS market leader with two million users in an extremely fragmented market and is growing rapidly. The company started in the small-and-medium business market and has migrated to also serving larger enterprises, helped by new channel partnerships. The company’s increasing scale from its growing recurring revenue should improve operating margins, allowing the company to achieve its long-term target of 20%-25%.”

Based on our calculations,  RingCentral, Inc. (NYSE: RNG) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. RNG was in 48 hedge fund portfolios at the end of the third quarter of 2021, compared to 47 funds in the previous quarter.  RingCentral, Inc. (NYSE: RNG) delivered a -13.32)% return in the past 3 months.

Disclosure: None. This article is originally published at Insider Monkey.