Why RingCentral, Inc. Stock Popped Friday

By Markets Fool.com

RingCentral tablet and phone

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You don't have to use a traditional phone with RingCentral's systems, but it's still an option. Image source: RingCentral.

What: Shares of RingCentral jumped off the hook today, rising as much as 13.9% on a second-quarter report with enough oomph to inspire an immediate analyst upgrade.

So what: In the just-reported second quarter, analysts expected RingCentral to deliver a net loss of $0.08 per share on $68.7 million in sales. The company exceeded both targets, reporting an adjusted net loss of $0.05 per share and sales of $70.7 million. In the year-ago quarter, the maker of cloud-based phone systems for corporate clients reported a $0.14 loss per share and revenue of $52.8 million. Seeing these results, analyst firm Raymond James raised the stock from an "outperform" rating to a "strong buy," adding 28% to an already optimistic target price.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Now what: Besides strong sales growth, RingCentral also widened its gross margins and reported increasing customer loyalty. During the quarter, RingData found a new distribution channel, integrated its calling solution with a market-leading office productivity platform, and picked up a small acquisition in the team messaging category.

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There's a lot going on here, and it shows on RingCentral's rapidly rising revenue line. And, according to press statements by RingCentral CEO Vlad Shmunis, that will soon translate into bottom-line growth as well.

"Importantly, our path toward profitability improved significantly with subscription gross margins now within our target range, and we continue to drive to reach non-GAAP operating profit break-even in the fourth quarter," Shmunis said.

The stock has now gained a market-crushing 33% year-to-date, and this report did absolutely nothing to slow down that momentum. Today's spike set a fresh 52-week high for the young stock, which first hit the market in the fall of 2013.

The article Why RingCentral, Inc. Stock Popped Friday originally appeared on Fool.com.

Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.