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Shares of RingCentral (NYSE:RNG) are down 4.5% in pre-open trading today after Needham & Company analyst Ryan Koontz downgraded to Hold from Buy and removed the $110 per share price target.
The analyst is concerned that Microsoft Teams’ footprint is stalling the expected RingCentral enterprise growth. If the deceleration continues, at one point 2023 estimates will be at high risk, Koontz told clients.
“Since 4Q21, we have worried that a softening pipeline could impact RNG’s enterprise revenue growth and limit the magnitude of revenue beats if new strategic partner sales did not quickly gain momentum. As outlined in our Enterprise Connect note, it has become clear that Microsoft Teams’ enterprise footprint up-sell to voice represents an increasing headwind to RNG growth,” the analyst said in a client note.
The analyst also noted that “new Teams sell-in dialing plan opportunities now reach below $5/mo/seat”. This has prompted the analyst to cut 2023 estimates for revenue growth from 24% to 22% and EPS from $2.48 to $2.29.
Moreover, the analyst is concerned about the “continued staff losses” that RNG is experiencing.
“We believe senior management changes at RNG have set back strategic efforts to respond to competitive threats and revisions to product and company strategy,” Koontz added.
