We recently published a list of 8 Best Video Conferencing Stocks To Buy According to Analysts. In this article, we are going to take a look at where RingCentral, Inc. (NYSE:RNG) stands against other best video conferencing stocks to buy according to analysts.
An Overview of The Video Conferencing Industry
Video conferencing software connects two or more parties virtually through video and audio over an internet connection. During the COVID-19 pandemic when lockdowns shut almost everything, the video conferencing market witnessed a surge in demand. According to a report by Grand View Research, the video conferencing market was valued at around $4.21 billion in 2020 and the valuation rose significantly to around $7 billion in 2022. Moreover, as per the most recent figures. The video conferencing market was valued at $28.61 billion in 2023 and is projected to grow from $33.04 billion in 2024 to $60.17 billion by 2032, indicating a compound annual growth rate of 7.8%.
According to a BBC report published on June 3rd, 2020, during the pandemic, the usage of the video conferencing platform Zoom surged 30 times in April 2020 alone. The report further highlighted that the daily participant usage exceeded 300 million users during peak pandemic times.
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At first, the market growth was driven by the pandemic and lockdowns around the globe, which forced businesses, government organizations, and education institutes to adopt virtual modes of engagement. For instance, in May 2020, the World Health Organization (WHO) held its first-ever virtual assembly. Moreover, educational institutes used videoconferencing software to conduct graduation ceremonies.
Fast forwarding to the post-pandemic era now that the world is back to normal the video conferencing market is driven by the rise in remote jobs and e-learning. According to a report by Pew Research published on March 30, 2023, around 35% of the US workforce was working remotely in 2023. Although this figure was down from 43% recorded in January 2022 and 55% in October 2020, which is the pandemic era, the percentage of remote workers was still up 7% compared to pre-pandemic years.
Looking at the regional insights, North America held the largest market share of around 31% in 2023 as it benefits from the large organizations that are engaged in developing video conferencing software. Moreover, the region is also home to an experienced workforce capable of adopting remote work. In addition to North America, the Asia Pacific region is expected to grow at the fastest CAGR due to the growing interest in digitalization across businesses, governments, and educational institutes.
Looking ahead, the rise and recent developments in artificial intelligence, the Internet of Things, and cloud technologies are expected to further boost the video conferencing market. According to a report by the World Economic Forum, global digital jobs are estimated to grow by around 25% to reach over 95 million indicating the growth prospects for video conferencing software due to its indispensable position for remotely operating organizations.
Our Methodology
To curate the list of 8 best video conferencing stocks to buy according to analysts we used various internet rankings and our previous articles. We compiled a list of video conferencing companies that were most widely held by hedge funds, sourced from Insider Monkey’s Q2 2024 hedge funds database. Next we checked analysts upside potential for each stock from CNN and ranked our stocks in ascending order of their upside potential. Please note that the data was recorded on November 8th 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Photo by Gabriel Benois on Unsplash
RingCentral, Inc. (NYSE:RNG)
Number of Hedge Fund Holders: 33
Analysts Upside Potential: 11.99%
RingCentral, Inc. (NYSE:RNG) is an AI-driven technology company that specializes in cloud-based communication solutions for businesses. The company offers a comprehensive suite of services including Unified Communications as a Service (UCAAS), which integrates voice, video, messaging, and collaboration tools into one service, allowing businesses to communicate seamlessly across various devices, and Contact Center as a Service (CCaaS), which provides businesses with tools to manage customer interactions across multiple channels. The company also provides video conferencing solutions for SMBs, large enterprises, remote workers, and global organizations.
It operates through four segments including Subscription Services, Professional Services, Hardware Sales, and Integration Partnerships. The company generates around 90% of its revenue from the subscription fee that customers pay for its cloud software.
On November 7th, 2024, RingCentral, Inc. (NYSE:RNG) released its third-quarter results for fiscal 2024. During the quarter the company announced a series of innovations related to AI integration to its software platforms. For instance, the company announced new innovations to its AI-powered RingCX, including a real-time AI-powered assistant for both agents and supervisors and advanced AI-based coaching insights for managers and supervisors.
The RingCentral AI assistant was introduced to the company’s flagship cloud communication platform, which has the ability to generate real-time notes from phone calls or video conference meetings. Moreover, this feature is now available at no additional cost for RingEX customers.
In addition to these AI-related highlights, the financial results were also encouraging. The company improved its total revenue by 9% year-over-year during the quarter which reached $609 million. The revenue growth was driven by a 10% increase in subscription revenue, which accounted for 96% of the total revenue.
What’s impressive about RingCentral, Inc. (NYSE:RNG) is its ability to generate substantial recurring revenue. In the third quarter alone, the company improved its monthly ARR by 9% to $2.48 billion and enterprise ARR by 11% to $1.07 billion. This strong recurring revenue enables the company to generate healthy free cash flow, which improved 51% year-over-year to $105 million for the quarter.
Looking ahead, management expects Q4 revenue to be between the range of $611.0 million to $613.0 million, indicating a 7% increase year-over-year. It is one of the best video conferencing stocks to buy according to analysts.
RiverPark Large Growth Fund made the following comment about RingCentral, Inc. (NYSE:RNG) in its Q1 2023 investor letter:
“RingCentral, Inc. (NYSE:RNG): Despite better-than-expected 4Q results and strong profitability guidance for 2023, RNG shares were a top detractor for the quarter following lower than expected revenue guidance for the full year 2023. Investor concerns appear to be centered around the competitive dynamics in the space. We continue to believe that RNG remains far ahead of its competition in both product breadth and depth in what is an enormous market. RNG has consistently maintained its #1 product ranking by Gartner for Large Enterprises and continues to expand its channel partnerships with large scale telecom services firms including Alcatel-Lucent, Atos, Avaya and Mitel, giving the company a significant leg up in converting on-premises PBX customers.
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 its 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% while also generating increasing FCF (which is expected to grow 150% this year).”
Overall, RNG ranks 7th on our list of best video conferencing stocks to buy according to analysts. While we acknowledge the potential of RNG to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than RNG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
