© Reuters. ‘Tremendous logic’ in a RingCentral (RNG), 8×8 (EGHT) merger – Craig-Hallum
By Sam Boughedda
Craig-Hallum Capital analysts told investors in a note Friday that the firm believes there is “tremendous logic” in a RingCentral, Inc. (NYSE:) and 8×8, Inc. (NASDAQ:) merger.
The analysts have a Buy rating on both stocks, with a $7 per share price target on EGHT and a $60 price target on RNG.
“We have long considered the Unified Communications market as one that needs to consolidate. It has been happening, perhaps in ways that are less logical,” wrote the analysts. “While Microsoft (via Teams) and Zoom via Zoom Phone have become relevant to the story, the #1 named competitor for RingCentral has remained 8×8. We are believers that the two companies would make great sense together, the economics should be outstanding for RingCentral as a buyer and for 8×8 as a seller.”
They added that the market opportunity for both businesses continues to be significant, with cloud adoption “still in its infancy.”
“Only 21M seats out of ~400M have moved to cloud (~5% penetration). Combining both businesses would create a powerhouse to go out and capture more of this opportunity with better unit economics and would likely alleviate some of the concern that’s plagued the stock (commoditization and competition) through the “removal” of RNG’s top competitor. Below, we walk through our thoughts,” said the analysts.
Ring Central shares are down over 3% Friday, while EGHT is up around 1.68%.
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