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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.

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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.

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Stocks Mentioned

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

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

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