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DocuSign Stock Plunges After EPS Miss and Guide Down, Evercore ISI Cuts to In Line

DocuSign Stock Plunges After EPS Miss and Guide Down, Evercore ISI Cuts to In Line

By Senad Karaahmetovic

Shares of DocuSign (NASDAQ:DOCU) are down almost 25% in premarket trading Friday after the company reported worse-than-expected Q1 earnings and slashed its full-year guidance.

DOCU reported Q1 adjusted EPS of 38c, compared to 44c in the year-ago period and below the analyst consensus of 46c per share. Revenue came in at $588.7 million, up 25% YoY and above analyst expectations of $581.8 million.

DocuSign generated $569.3 million in subscription revenue, beating the consensus projection of $564.6 million. The e-signature company reported $613.6 million in billings, up 16% YoY and topping the analyst estimates of $578.5 million.

The adjusted gross margin stood at 81%, while analysts were expecting 80.5%.

For the second quarter, DocuSign expects to see revenue in the range of $600 million to $604 million, while analysts were looking for $602.2 million. Subscription revenue is expected to range between $583 million to $587 million in the second quarter, compared to the consensus estimates of $581 million. The company expects Q2 billings to be between $599 million and $609 million, well below the analyst estimates of $659.3 million.

For the full fiscal 2023, DocuSign expects revenue in the range of $2.47 billion to $2.48 billion, with analysts expecting also $2.48 billion. The company expects FY 2023 subscription revenue to range from $2.39 billion to $2.41 billion, compared to the analyst estimates of $2.4 billion. The company estimates FY 2023 to range between $2.52 billion and $2.54 billion, down from $2.71 billion to $2.73 billion, while analysts were estimating $2.72 billion.

Evercore ISI analyst Kirk Materne downgraded DocuSign stock to In Line from Outperform with a price target of $75.00 per share, down from $100.00. The analyst sees “too many moving parts” and better risk/reward elsewhere.

“Not huge fans of the post EPS downgrade and while DOCU shares are probably close to a bottom at current levels if one is taking a longer-term view, we believe the combination of tough compares and continued execution challenges/turnover in the field means any meaningful rebound in billings growth is still further out than we hoped,” Materne said in a client note.

The analyst added that “the upside is very limited.”

“We believe until billings accelerates back above 20%, the margin guide needs to point investors to a 20%+ op. margin outlook for FY24 to offset the revenue deceleration.”

RBC analyst Rishi Jaluria cut the price target on DOCU stock to $80.00 per share from $85.00 but remains Outperform-rated despite “disappointing” results.

“DOCU reported a disappointing F1Q23, with a cut in FY billings guidance being the headline, leading shares down 23% AMC. Our other key takeaways were: 1) management underestimated the impact from higher interest rates as well as pulled-forward demand during COVID; 2) while GTM changes are now complete, execution could take longer than expected; 3) underlying metrics underperformed, except net adds; and 4) FY23 margin guide kept, despite investor concerns of downward revisions,” Jaluria explained in a note.


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