Please ensure Javascript is enabled for purposes of website accessibility

Why RingCentral Shares Have Fallen 34% So Far in 2021

By Anders Bylund - Updated Jul 19, 2021 at 1:24PM

Key Points

  • RingCentral’s sales are soaring, even though stock prices are down.
  • Getting workers back to the regular old office could be bad news for this company.
  • This beaten-down stock looks like a sensible buy today.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The red-hot cloud communications sector is cooling down thanks to widespread vaccination against COVID-19.

What happened

Shares of cloud-based communications expert RingCentral (RNG 4.47%) have fallen 34.1% this year as of today, according to data from S&P Global Market Intelligence. The company exceeded Wall Street's targets in the earnings reports it posted in February and May, but investors still turned away from the soaring growth stock as the business world started calling work-at-home employees back to the office.

^SPX Chart

^SPX data by YCharts.

So what

Remote-work policies have been a boon for RingCentral during the coronavirus crisis, as the company's all-digital voice and video communication solutions came in handy for getting your job done from the living room or home office. Top-line sales rose 31% year over year in the fourth quarter of 2020, and the growth accelerated to 34% in the first quarter of 2021.

So a return to normalcy looks like a threat to RingCentral's booming business. Widespread vaccinations in the spring pointed to remote work fading away in the near future, driving share prices down even though the reported results were consistently strong.

Person holding up a red landline phone handle with a confused look on his face.

Image source: Getty Images.

Now what

RingCentral's decline includes an 8% drop today, as video conferencing specialist Zoom Video Communications (ZM 1.35%) is buying Five9 (FIVN 0.87%), a provider of cloud-based call center software, in a $14.7 billion deal. That business combination might tighten the competition for cloud-based calling services, which is RingCentral's home turf. Watching Zoom pick Five9 instead looks like a missed opportunity for RingCentral.

That being said, RingCentral remains a proven leader in the cloud communications sector, and any deal activity could be seen as validation of the digital voice business. Picking up a couple of shares at these lower prices could set you up for solid long-term returns.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Five9 and Zoom Video Communications. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

RingCentral, Inc. Stock Quote
RingCentral, Inc.
$53.00 (4.47%) $2.27
Five9, Inc. Stock Quote
Five9, Inc.
$117.17 (0.87%) $1.01
Zoom Video Communications Stock Quote
Zoom Video Communications
$109.52 (1.35%) $1.46

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.