The shares of cloud-based communications concern RingCentral (RNG) gapped higher on Aug. 7, and touched a record high of $90.05, after the company reported stronger-than-expected earnings and upped its full-year revenue guidance. Since then, RNG shares have been consolidating their gains — and now could be an opportune time to bet bullishly, if history is any indicator.
RingCentral stock has added 125% in the past year, and was last seen trading around $88.15. Meanwhile, in light of a post-earnings volatility crush, RNG’s short-term options are attractively priced. The stock’s Schaeffer’s Volatility Index (SVI) of 35.3% is in just the 13th percentile of its annual range, suggesting near-term options are pricing in relatively low volatility expectations at the moment.
There have been three other times where RNG shares were within 2% of their 52-week high while simultaneously sporting an SVI in the bottom 20% of its 12-month range. After those signals, RNG stock was higher one month later every single time, racking up an average gain of 11.8%. A similar pop from current levels would put the shares around $98.55 — deeper into uncharted territory.
RingCentral also appeared on our radar due to being under the collective radar on Wall Street. Specifically, the stock is on our short lists of equities that have outperformed the S&P 500 Index in the past year, yet short interest has increased while the number of analyst “buy” ratings have decreased.
Digging in, short interest on RNG has more than doubled in the past year, surging nearly 78% in just the past two reporting periods. At the equity’s average daily volume, it would take about a week to buy back these bearish bets — signaling ample sideline cash to fuel more upside.
Meanwhile, the number of “buy” endorsements has declined in the past year, with just 77% of analysts in the bullish camp. Likewise, the consensus 12-month price target for RNG is just $94.08 — a premium of less than 7% from the stock’s current price. A round of well-deserved upgrades and price-target hikes could add fuel to the outperformer’s fire.
Speculators expecting a burst higher for RingCentral shares could consider near-term call options. The stock’s September 80 call was last asked at $10.20, meaning buyers would profit if RNG tops $90.20 — a 2.3% move higher from current levels — by the close on Friday, Sept. 21, when the options expire.