LegalZoom (LZ) shares plunged more than 28% Wednesday after the company announced a new CEO and reduced its revenue expectation for the full year.
The company announced that its current Chairman of the Board of Directors, Jeffrey Stibel, has been named its next CEO, effective immediately, while it has also appointed John Murphy as the Lead Independent Director of the Board.
Current CEO Dan Wernikoff will leave the company and resign from the Board after deciding that "now is the right time for this transition, as the company increases its focus on shifting towards subscription-based revenue to drive long-term profitable growth."
Looking ahead, LegalZoom continues to expect second-quarter revenue in the range of $172 million to $176 million and adjusted EBITDA for the quarter between $25 million to $27 million.
However, for the full year ending December 31, LegalZoom reduced its revenue expectation for the full year to between $675 million and $685 million and free cash flow expectation to a range of $75 million to $85 million.
The company reiterated that full-year adjusted EBITDA is expected to be in the range of $135 million to $145 million.
Reacting to the news, Bank of America downgraded LZ to Underperform from Buy, cutting the price target to $6 from $13 per share.
"We are downgrading to Underperform (from Buy) given our expectation that growth could remain muted through the end of the year, as recent quarterly earnings commentary has noted ongoing market share losses (and share-losers have historically traded at a discount to peers in the Internet sector," wrote BofA.
JPMorgan also downgraded the stock — to Neutral from Overweight —cutting the price target to $9 from $14 per share.
"Despite the dismal stock performance since 1Q24 results, we view this announcement as unexpected. Investors are likely to take this as a signal of newfound operational troubles at the company," said the investment bank. "We now think there is undue risk in the name."