RiverPark Funds Believes RingCentral (RNG) has Huge Growth Potential

RiverPark Funds, an investment management company, released its “RiverPark Large Growth Fund” second quarter 2022 investor letter. A copy of the same can be downloaded here. The second quarter was extremely difficult for the fund which returned -34%. Year to date, the fund returned -47%. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.

RiverPark Funds discussed stocks like RingCentral, Inc. (NYSE:RNG) in the second quarter investor letter. Headquartered in Belmont, California, RingCentral, Inc. (NYSE:RNG) is a software-as-a-service solutions provider. On September 20, 2022, RingCentral, Inc. (NYSE:RNG) stock closed at $43.41 per share. One-month return of RingCentral, Inc. (NYSE:RNG) was -0.89% and its shares lost 80.43% of their value over the last 52 weeks. RingCentral, Inc. (NYSE:RNG) has a market capitalization of $4.138 billion.

Here is what RiverPark Funds specifically said about RingCentral, Inc. (NYSE:RNG) in its Q2 2022 investor letter:

RingCentral, Inc. (NYSE:RNG) is a software-as-a-service (SaaS) provider of communications solutions to large enterprises. The company’s solutions replace legacy office phone systems or Private Branch Exchanges (PBX) with a cloud-based virtual solution that enables a customer’s employees to communicate via voice, text, video/web conferencing, and fax over multiple devices including cell phones, tablets, and computers from any location. This cloud-based phone systems market, typically referred to as Unified-Communication-as-a-Service (UCaaS) is a roughly $10 billion market today and is projected to grow to over $100 billion over the next ten years as companies move their communications systems to the cloud.

The move to UCaaS adoption is being driven by both the obsolescence of PBX hardware underlying current office phone systems, and, like cloud adoption across the software stack, cloud-based phone systems being less expensive, more feature rich, and accessible anywhere. RingCentral (which went public in 2013) is the leading vendor to the UCaaS market and has enjoyed greater than 28% revenue growth in every year since its IPO, a growth rate that continued in the company’s recently reported 1Q22 in which it grew revenue 33%. We believe the company can continue to grow revenue north of 25% for many years to come, driven by the global conversion of more than 400 million on-premises phone systems to the cloud. RingCentral is well positioned to continue to win the lion’s share of this UCaaS migration, as the company has partnered with many of the largest legacy PBX vendors (including Avaya, Atos, AlcatelLucent, and Mitel) to be their recommended cloud solution for customers whose maintenance period on their installed systems ends (and the vendors no longer support them). RNG has also partnered with communications giants like Vodafone, AT&T and Verizon to sell co-branded cloud solutions into their customer bases.

As the company’s revenue scales, we expect gross margin to continue to improve from its already strong 80%, while we expect the company to continue to expand its EBITDA margin from 18% in 2022, toward typical SaaS margins of 40% or higher over the next several years…” (Click Here to read the full text)

RingCentral, Inc. (NYSE:RNG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held RingCentral, Inc. (NYSE:RNG) at the end of the second quarter which was 43 in the previous quarter.

We discussed RingCentral, Inc. (NYSE:RNG) in another article and shared the list of stocks that can begin to rebound in 2023. In addition, please check out our hedge fund investor letters Q2 2022 page for more investor letters from hedge funds and other leading investors.

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