Chase Coleman Reinforces RingCentral Bet

Summary

  • The company is creating workforce solutions to accommodate remote employees.

Chase Coleman (Trades, Portfolio), founder of Tiger Global Management and one of Julian Robertson (Trades, Portfolio)’s former “tiger cubs,” disclosed earlier this week he upped his stake in RingCentral Inc. RNG (RNG, Financial) by 23.98%.

Established in 2001, the guru’s New York-based hedge fund is known for focusing on small-cap stocks and technology startups, having been an early investor in companies like Facebook Inc FB . (FB, Financial) & Spotify Technology SA (SPOT), Financial.

According to GuruFocus Real-Time Picks, a Premium feature, Coleman invested 945,000 shares of the Belmont, California-based software company on Oct. 14, impacting the equity portfolio by 0.41%. The stock traded for an average price $236. 96 per share on the day of the transaction.

He now has 4.8 million shares. This accounts for 2. 14% of the equity portfolio. GuruFocus estimates Coleman has gained 50. 39% on the investment since establishing it in the first quarter of 2019.

Coleman’s holding history of RingCentral.

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The company, which provides enterprise cloud communications, video meetings, collaboration and contact center solutions, has a $21. 92 billion market cap; its shares were trading around $238. 39 on Friday with a forward price-earnings ratio of 141. 44, a price-book ratio of 237. 64 and a price-sales ratio of 15.78.

The GF Value Line VALU suggests the stock is modestly undervalued currently based on its historical ratios, past performance and future earnings projections.

The GF Value Line shows the stock is modestly undervalued currently.

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In August, RingCentral reported its second-quarter results, posting adjusted earnings of 32 cents per share on $379 million in revenue, which was an improvement from the prior-year quarter.

RingCentral’s revenue and net income growth.

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More recently, the company introduced RingCentral Rise, a platform that counts service providers like AT&T Business (T, Financial), Ecotel (XTER:E4C, Financial), MCM and TELUS (TSX:T, Financial) among its users. RingCentral pointed out that the service allows customers to provide their own unified cloud communications solutions to businesses, including video conferencing, team messaging and contact center solutions. It is flexible, scalable, and fast.

This month, RingCentral also introduced new innovations that will allow organizations to connect and integrate their business platforms to accommodate hybrid work. Many employees are still working remotely.

GuruFocus rated RingCentral’s financial strength 3 out of 10. The Altman Z-Score score of 7.3 shows that the company is in good standing despite having lower debt-related ratios than its competitors. However, assets are growing at a faster pace than revenue, which could indicate that the company is becoming less efficient.

The company’s profitability fared even worse, scoring a 2 out of 10 rating on the back of declining margins and negative returns on equity, assets and capital that underperform a majority of industry peers. RingCentral has a moderate Piotroski score of 4, which means that conditions are suitable for stable companies. It also has a predictability rank ranking of one out five stars. According to GuruFocus, companies with this rank return an average of 1.1% annually over a 10-year period.

With a 5. 34% stake, Coleman is RingCentral’s largest guru shareholder. Ron Baron (Trades, Portfolio), Pioneer Investments, PRIMECAP Management (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Chuck Royce (Trades, Portfolio) and Baillie Gifford (Trades, Portfolio) also own the stock.

Portfolio composition

Over half of Coleman’s $53. 76 billion equity portfolio, which was composed of 142 stocks as of June 30, is invested in the technology and consumer cyclical sectors.

Coleman’s portfolio composition by sector.

GuruFocus.com

Other software companies the guru was invested in as of the end of the second quarter included Microsoft Corp MSFT . (MSFT, Financial), DocuSign Inc. (DOCU, Financial), CrowdStrike Holdings Inc CRWD . (CRWD, Financial), Zoom Video Communications Inc. (ZM, Financial), Shopify Inc. SHOP (SHOP, Financial) and ServiceNow Inc NOW . (NOW, Financial).

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Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

GuruFocus Contributor
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