DocuSign Reports A 'Skinny Beat' With 'Street's Calibration To The New Cadence May Take A Quarter Or Two'

Zinger Key Points
  • DocuSign reported the lowest revenue beat in more than 5 years, one analyst said.
  • Although the company raised FY25 outlook, the revision was lower than the FQ1 beat, another analyst added.

DocuSign Inc DOCU shares tanked in early trading on Friday, even after the company reported upbeat revenues for its first quarter.

The results came amid an exciting earnings season. Here are some key analyst takeaways.

Piper Sandler On DocuSign

Analyst Rob Owens maintained a Neutral rating while reducing the price target from $65 to $60.

DocuSign's revenues grew by 7.3% year-on-year to $710 million, surpassing expectations, Owens said in a note. He added, however, that this was the "lowest beat in the past 5+ years."

The company reported operating margins of 28.5%, which took earnings to 82 per share, exceeding Street expectations by 3 cents, the analyst stated.

"Positive feedback to the rollout of IAM was encouraging, but success with this strategy will be measured over multiple years, and is unlikely to drive a near-term inflection in the business in our view," he further wrote.

RBC Capital Markets On DocuSign

Analyst Rishi Jaluria reiterated a Sector Perform rating while cutting the price target from $59 to $52.

DocuSign reported a "skinny beat," with the upside in revenue, billings, and operating margin coming in lower than usual, Jaluria said. The company raised its subscription revenue and billings guidance for the full year, but the revision was less than the first-quarter beat, he added.

"PLG investments are starting to bear fruit and consumption trends improved slightly," the analyst wrote. "All in, the quarter was fine but below high expectations and likely tempers the case for near-term reacceleration (and IAM)," he further stated.

JMP Securities On DocuSign

Analyst Patrick Walravens reaffirmed a Market Outperform rating and a price target of $84.

DocuSign reported better-than-expected results, Walravens said. He added, however, that billings grew by 5% on a year-on-year basis but was down from the 13% growth recorded in the previous quarter.

While guidance was better than expected, it benefited from some not material amount from the Lexion acquisition, the analyst stated.

"While DocuSign will need to work through operational changes as it rolls out its new IAM platform, we continue to like the story for a number of reasons," he further wrote.

Check out other analyst stock ratings.

JPMorgan On DocuSign

Analyst Mark Murphy maintained an Underweight rating and a price target of $50.

The company's upside softened in the quarter, despite conservative expectations, with early renewals helping billings, Murphy said. The results showed some "subtle signs of ongoing stabilization," with usage trends showing a "modest improvement" that was similar to the first half of 2024, he added.

"However, DocuSign suggests that the "enterprise environment might be slightly tighter" than the SMB environment right now, in our view somewhat surprising given peer indications, while some investors will likely speculate if this could suggest greater competition from peers such as Adobe," the analyst wrote.

"Overall, while we are encouraged by comments that the company maintains its long-term aspirations to be a double-digit grower, we believe there remains a lot of headway to be made on its GTM efforts to achieve this," he further stated.

Needham On DocuSign

Analyst Scott Berg reiterated a Hold rating on the stock.

DocuSign's upside was lower than in recent quarters and the guidance up was more conservative, Berg said. "While management suggests its improved ability to call the business is resulting in tighter guidance ranges, we believe the Street’s calibration to the new cadence may take a quarter or two," he added.

Although company's profitability improved in the quarter, after the recent layoffs, the free cash flow margin was "essentially flat" on a year-on-year basis, which may have contributed to the decline in share price after the earnings release, the analyst stated.

"Initial IAM commentary was positive, but we do not expect any meaningful revenue contribution from it until FY27," he added.

Oppenheimer On DocuSign

Analyst George Iwanyc reaffirmed a Perform rating on the stock.

DocuSign's results were "solid," with revenue and margins above the high-end of guidance, Iwanyc said. "The results showcase steady operational execution, strong free cash flow, and encouraging commentary on customer engagement," he added.

The analyst stated, however, the company's near-term expansion opportunities "remain muted" and its IAM transformation could "take time to gain traction."

DOCU Price Action: Shares of DocuSign had declined by 5.73% to $51.47 at the time of publication on Friday.

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Photo: Courtesy DocuSign

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