What Happened:

Shares of office and call centre communications software provider RingCentral (NYSE:RNG) fell 10.2% in the afternoon session after the company reported second-quarter earnings in which it made a significant announcement. Vlad Shmunis, founder and CEO of the company, will be stepping down on August 28, 2023. Tarek Robbiati, a member of the RingCentral Board of Directors since December 2022 and CFO and EVP of Finance and Strategy of Hewlett Packard Enterprise, will succeed him as CEO. In addition, RingCentral's COO (since Jan 2022), Mo Katibeh will be stepping down, but will remain as a special advisor to the Company for the next few weeks, ensuring a smooth transition. 

Besides the news of the leadership change, second-quarter revenue came in slightly above Wall Street's expectations. Earnings per share also beat. Moving ahead, the company provided full-year revenue guidance roughly in line with Consensus. Following the results, Craig Hallum analyst downgraded the stock's rating from Buy to Hold and maintained a price target of $38.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy RingCentral? Access our full analysis report here, it's free.

What is the market telling us:

RingCentral's shares are very volatile and over the last year have had 44 moves greater than 5%. But moves this big are very rare even for RingCentral and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The previous big move was three months ago, when the stock gained 11.1% on the news that the company reported an encouraging "beat and raise" quarter. First-quarter revenue, adjusted EBITDA, free cash flow, and earnings per share (EPS) all beat Consensus estimates. Revenue guidance for the next quarter and the full year came in roughly inline with Consensus. On a more positive note, EPS guidance for the next quarter exceeded expectations, and the company raised the full-year EPS guidance. Overall, it was a solid quarter for the company especially considering the mixed results of peers and macro uncertainty.

RingCentral is down 6.25% since the beginning of the year, and at $32.34 per share it is trading 39% below its 52-week high of $53 from August 2022. Investors who bought $1,000 worth of RingCentral's shares 5 years ago would now be looking at an investment worth $372.43.

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