Why DocuSign Shares Are Trading Lower Premarket?

Why DocuSign Shares Are Trading Lower Premarket?

Analysts downgraded the rating and price target on DocuSign Inc DOCU on a softer revenue outlook for Q4 FY21 and FY22.

  • JPMorgan analyst Sterling Auty downgraded to Underweight from Neutral with a $175 price target, implying a 25.2% downside to Thursday's closing price of $233.82.
  • Tailwinds from pandemic tailwinds "came to a much faster than expected halt" in Q3.
  •  DocuSign's sales now need to pivot from a focus on demand fulfillment to demand generation, which will lead to revenue growth seeing a "noticeable deceleration" into the first half of the next fiscal year. 
  • Auty thinks the shares could underperform software peers during this timeframe even though DocuSign's long-term market opportunity "remains robust."
  • UBS analyst Karl Keirstead downgraded to Neutral from Buy with a price target of $170, down from $350, implying a 27.3% downside. 
  • The company reported a "thesis-changing print" with billings growth of just 28% and guidance for just 23% billings growth in Q4. 
  • The analyst lowered estimates for FY23, saying his prior thesis that DocuSign could maintain 30%-plus billings and revenue growth for years even as employees returned to the office "was clearly wrong."
  • Piper Sandler analyst Rob Owens downgraded to Neutral from Overweight with a price target of $200, down from $330, implying 14.5% downside. 
  • The company last night posted a billings miss and only a modest revenue beat as it failed to maintain momentum as demand normalization happened faster than expected post-pandemic.
  •  The analyst says DocuSign's "weak" guidance adds to the uncertainty. 
  • He has a lack of confidence in the timeline of DocuSign's turnaround, "setting 2022 up for a murky year."
  • Price Target: DOCU shares traded lower by 32.6% at $157.63 in the premarket session on the last check Friday.

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