Arq Group shares fall as CEO steps down, broker lowers price target

As Arq Group’s CEO steps down, Bell Potter has slashed its price target on the Sydney-based tech company by 46%.

It’s been a brutal year for Arq Group (ASX: ARQ) shareholders, with the company’s stock falling around 73% since January.

Adding to this decline, reports that the company’s CEO would be stepping down, that underlying earnings would come in lower, and now a broker downgrade haven’t helped matters for the beaten-down stock.

Arq CEO steps down

Yesterday it was announced that Martin Mercer would be stepping down from his role as Chief Executive Officer, effective immediately. Mr Mercer will also no longer serve as a director of the company, effective immediately.

Though the company is currently seeking a full-time replacement, Tristan Sternson has been appointed to serve as the Interim CEO. Mr Sternson has significant professional services experience across companies such as PWC, Accenture and the tech behemoth IBM.

Finally, Arq Group (ASX: ARQ) has hired Macquarie Capital to complete a strategic review of its business, with the objective being to explore all ‘avenues for shareholder value creation’.

Such a move is likely to be well received by shareholders.

Guidance comes in lower

As market conditions turn sour for the company’s Enterprise Division, Arq Group (ASX: ARQ) yesterday revised its group earnings down.

Here the company wrote that, ‘group underlying EBITDA is expected to be in the range of $16.8m to $19.3m (compared to previous guidance for the group of $27.0m to $30.5m).’

Cost saving programs would not be enough 'to offset the revenue shortfall,’ says the company.

Amongst all this activity, set against the backdrop of a trading halt, Arq Group’s share price have fallen from A$0.54 last Thursday, to A$0.34 per share today.

Brokers turn bearish: Arq Group share price in focus

Analysts from Bell Potter today released a report on the Sydney-based tech company, lowering their price target by 46% – to A$0.35 per share – while maintaining their hold rating on the stock.

Based on the earnings changes as they relate to lower guidance, the broker has downgraded its earnings (EBITDA) forecasts for Arq’s 2019, 2020 and 2021 fiscal years.

Bell potter also flagged the potential of the company breaching its debt covenants as a possible risk.

Arq Group’s current share price is a far-cry from the once high-flying tech company’s peak. During the top of the dot-come boom, for example, its share price almost touched the A$15 mark.

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