Analysts Remain Divided Over DocuSign's Recent Downsizing Plans

Analysts Remain Divided Over DocuSign's Recent Downsizing Plans
  • DocuSign, Inc DOCU announced a Board-approved reduction-in-force of roughly 9% of its workforce yesterday
  • Needham analyst Scott Berg reiterated a Hold on the stock.
  • He believes the move right-sizes Docusign's operations for near-term growth he expects to remain materially below pandemic levels. 
  • However, he found the timing a bit interesting, given that newly announced CEO Allan Thygesen has yet to start. 
  • The analyst assumed the new CEO fully consulted and signed off on the plan since he would be critical of its execution. 
  • While management provided few details, he expects most of the reduction will not impact client-facing or client-success functions. 
  • The analyst did not update his model at this time but believes the RIF will reduce operating expenses by 4% - 5%, equating to $80 million - $100 million in annual savings or $0.39 - $0.48 per share in EPS once fully implemented.
  • RBC Capital analyst Rishi Jaluria cut the price target on DocuSign to $55 from $65 and maintained a Sector Perform. 
  • DocuSign's restructuring plan is "slightly negative," even though it gives investors comfort on margins and supports the management's earnings call commentary that DocuSign overhired during the pandemic. 
  • However, he is "more cautious" about DocuSign's near-term as the cost-cutting comes despite its sales organization's high rate of churn.
  • Price Action: DOCU shares traded lower by 0.99% at $54.76 on the last check Thursday.

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