New CEO at Absolute Software is a mixed blessing, PI Financial says

The departure of Absolute Software (Absolute Software Stock Quote, Chart, News: TSX:ABT) CEO Geoff Haydon is being met with equal doses of caution and optimism from PI Financial analyst David Kwan.

This morning, Absolute Software announced that Steve Munford had been appointed interim CEO following Geoff Haydon’s resignation yesterday. The board will conduct a search for a permanent replacement.

“As an adviser to Absolute for the past two years, I am deeply invested in driving greater adoption of the company’s solutions by organizations struggling to manage thousands of distributed end point devices containing sensitive data,” Munford said. “The company is in an enviable position with a unique and incredibly relevant solution that provides unprecedented visibility and control to end points on and off the corporate network and makes a range of other end point agents stronger through self healing. I am extremely confident in the capabilities of Absolute’s leadership team and look forward to working with them to accelerate growth.”

Kwan says this development is unlikely to drive the stock up or down too dramatically.

“We believe Mr. Haydon has significantly improved ABT from a competitive perspective, which should make the new CEO’s job easier, although this has helped lead to lackluster financial performance,” the analyst says. “We expect a mixed response to Mr. Haydon’s departure. On the one hand, his departure gives ABT the opportunity to bring someone in with a fresh set of eyes that hopefully can kick start the Company’s growth and get it well on the path to its target of 20% revenue growth and 20% Adj. EBITDA margins. On the other hand, investors may lose (even more) patience as it could take longer to get to these targets with a new CEO coming in, especially if they decide that more changes are required.”

In a research update to clients today, Kwan maintained his “Buy” rating and one-year price target of $8.75 on Absolute Software, implying a return of 26.2 per cent over Monday’s closing price of $6.93.

Kwan thinks Absolute Software will generate Adjusted EBITDA of (U.S.) $6.6-million on revenue of $94.4-million in fiscal 2018. He expects those numbers will improve to EBITDA of $14.-million on a topline of $104.8-million the following year.