Photograph by Stan Olszewski
were sinking in premarket trading Friday after the e-signature software company issued a fourth-quarter forecast that missed estimates.
Analysts at Citigroup said DocuSign “delivered one of the biggest [Software as a Service] whiffs in recent memory.”
The company said it expects revenue for the fiscal fourth quarter ending Jan. 31, of $557 million to $563 million, below analysts’ expectations of $573.8 million. DocuSign expects fourth-quarter billings of $647 million to $659 million. Analysts were forecasting fourth-quarter billings of $705.4 million, according to FactSet.
“With a largely resilient performance vs [work-from-home] peers over the last two Qs, we are surprised that DOCU is seeing significant customer behavior/execution issues cropping up now, and in this magnitude,” said the Citigroup analysts, led by Tyler Radke.
The firm maintained its Buy rating on the stock but reduced its price target to $231.
DocuSign reported third-quarter earnings that showed signs of weakening demand. CEO Dan Springer said the company “after six quarters of accelerated growth” was seeing “customers return to more normalized buying patterns.”
Springer told Barron’s in an interview that some customers accelerated demand during the pandemic, and that consumption has returned to a more normal level.
Analysts at RBC Capital Markets maintained their Outperform rating on the stock but lowered the price target to $220 from $345.
RBC noted how DocuSign’s “Covid boost evaporated” and demand returned to more normalized levels “faster than expected.”
“While we are still bullish on the long-term, this demand gen pivot may take time, and we expect shares of DocuSign to be in the penalty box for the near term,” the analysts wrote.
Wedbush analysts downgraded shares of DocuSign to Neutral from Outperform and lowered their price target to $200 from $340.
The analysts said it appears DocuSign “was caught blindsided by the quickly changing sales environment which is a worrying trend for the Street. “
Evercore rates the stock at Outperform but cut its price target to $200.
“DocuSign simply misread the market in terms of demand and that led to a faster than expected deceleration in billings growth,” the analysts wrote in a research note.
DocuSign shares were down 32.1% in premarket trading Friday to $158.64.
Write to Joe Woelfel at [email protected]