KeyBanc Ups DocuSign Price Target On Q4 Beat, Customer Scale

DocuSign Inc DOCU reported fourth-quarter results Thursday that were ahead of expectations.

The company delivered strong growth and continues to extend its lead in the e-signature and system of agreement segments, according to KeyBanc Capital Markets.

The Analyst

KeyBanc Capital Markets’ Rob Owens maintained an Overweight rating on DocuSign and raised the price target from $59 to $65.

The Thesis

The electronic signature technology firm reported billings and revenue of $262.4 million and $199.7 million, respectively, higher than KeyBanc’s estimates of $251.1 million and $193 million.

The year-over-year revenue growth of 34 percent reflects healthy new customer acquisition as well as expanding volumes in existing customer lines, Owens said in a Thursday note. 

Despite this being the first full quarter after the SpringCM acquisition, DocuSign achieved record operating margin and operating cash flow of 3.7 percent and $34.1 million, respectively, significantly beating KeyBanc’s estimates of 0.8 percent and $22.5 million, the analyst said. 

DocuSign ended the quarter with around 477,000 total customers, with 23,000 adds. This made FY19 the third straight year of improving adoption in the enterprise and commercial market, Owen said. 

With DocuSign’s shares appreciating around 50 percent since January, the market may focus on the net renewal rate coming at the lower end of the historical range in the fourth quarter, as well as merely 3,000 net customer adds by the enterprise and commercial segment, the analyst said.

"We would view any outsized emphasis on these factors as noise, and take confidence in the strong billings and subscription revenue trends.”

Price Action

DocuSign shares were down 3.65 percent at $56.70 at the time of publication Friday. 

Related Links:

DocuSign's Era Of 'Modest Market Acceptance' Is Over, KeyBanc Says In Bullish Initiation

DocuSign Falls Despite Earnings, Sales Beat