RingCentral shares are trading sharply lower Thursday after the cloud-based communications company announced that Anand Eswaran is stepping down as the company’s president and chief operations officer.
In a statement included in the announcement, Eswaran said he is taking a position as CEO for a “late stage private company” not competitive with RingCentral (ticker: RNG) that has over $1 billion in annual recurring revenue. He didn’t identify the company.
RingCentral shares are down 14% on the news, at $184.50. The S&P 500 is down 0.4%.
The announcement comes just a few weeks after the company announced the planned departure of Mitesh Dhruv as chief financial officer. Ring has now appointed Chief Accounting Officer Vaibhav Agarwal as interim CFO effective Jan. 1.
Ring said that “given the momentum in the business,” it remains “very confident” in its previously issued 2021 guidance, which calls for revenue of $1.58 billion to $1.581 billion, up 33% to 34%.
Analysts appear to be concerned about the departures.
“Eswaran has been an instrumental executive, especially regarding the company’s positioning and partnerships,” writes Piper Sandler analyst James Fish in a research note. He adds that the news “marks another major executive departure, which for a company with such a massive opportunity in front of it, will further raise questions and bear rhetoric regarding a potential slowdown.” Fish keeps his Overweight rating and $352 price target on the stock.
William Blair analyst Bhavan Suri maintains his Outperform rating on the shares, but concedes that Eswaran’s departure is a hit to the story. “We believe Eswaran was highly effective in his role as COO at RingCentral and that he has been a notable contributor to the company’s strong execution over the past two years; we are sad to see him go,” he writes. “While multiple executive leadership transitions will need to be carefully managed to avoid disruption in execution, we believe that the broader team at RingCentral has built a strong foundation, which we expect will continue to drive durable growth in the business going forward.”
Mizuho analyst Siti Panigrahi keeps his Buy rating on the stock, but chops his target price to $300, from $400, on the news. “We believe that [the] announcement will trigger near-term disruption, primarily given Anand’s involvement in go-to-market activities,” he writes. “In our view, today’s departure could fuel the ongoing bearish narrative around RingCentral’s growth fundamentals and keep shares range-bound until stellar execution potentially manifests in coming quarters.”
Write to Eric J. Savitz at [email protected]
