Five9 CEO’s Departure Raises Questions on Strategic Direction Differences

By Sam Boughedda

On Monday, Five9 (NASDAQ:) announced that CEO Rowan Trollope had resigned, sending its shares more than 25% lower.

Trollope has accepted the role as CEO of a privately held pre-IPO startup, with former Five9 CEO Mike Burkland appointed to the CEO position once again, in place of Trollope.

Five9 shares are down 0.6% at the time of writing.

Morgan Stanley analysts downgraded shares of the stock to Equal-Weight from Overweight, cutting the price target to $75 from $120. Marshall said in a note to investors that given the CEO transition, they believe it is unlikely investors will want to jump into the name, “particularly given Rowan’s association with accelerating the business in 2018 onward.”

“The 20%+ sell-off intra-day on news of management transition is likely overdone, but given macro overhang, we think the name is likely to trade more in-line with general software universe and unlikely to trade at a premium in the near term,” added the analysts.

Meanwhile, Credit Suisse analysts maintained a Neutral rating and a $70 price target on the stock. Lee stated the resignation “likely takes near term M&A off the table, disappointing some shareholders.”

“This is a relatively short tenure for Mr. Trollope, and while we understand the unique opportunity, the decision raises some questions regarding FIVN’s growth opportunities,” added the analysts.

BofA reiterated an Underperform rating and $75 price target on Five9 shares. Analysts there stated: “Mike Burkland’s previous experience as CEO and long-time Chairman of FIVN creates continuity, in our view. However, the change at this point in the economic cycle is likely to raise questions regarding differences in strategic direction.”

Finally, BTIG reiterated a Buy rating on Five9 but trimmed the price target to $125 per share from $165.

“We do not expect any major changes in the company’s strategy or leadership in the short run, and expect results to remain at or above consensus trends given the strong secular tailwinds driving increased adoption of modern CCaaS solutions across the enterprise landscape,” wrote BTIG.