DocuSign Crashes 29.7% on Weak Guidance, Q3 Results Outperform

DocuSign, Inc. (DOCU) delivered robust third-quarter results with both earnings and revenue exceeding estimates by a huge margin. However, shares crashed 29.7% during the extended trading session on December 2, after the company provided lower-than-expected Q4 and FY22 guidance.

Don't Miss Our Christmas Offers:

Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter

DocuSign enables customers to manage electronic agreements and signatures. With a market cap of $46 billion, its shares have gained a modest 1.2% over the past year.

Robust Results

DocuSign’s quarterly earnings rose a whopping 163.6% year-over-year to $0.58 per share, 12 cents higher than analysts’ estimates of $0.46 per share.

Furthermore, revenue came in at $545.46 million, a 42% growth against the prior-year quarter, meaningfully outpacing analysts’ estimates of $530.63 million.

Compared to Q3FY20, DocuSign’s Billings jumped 28%, Subscription revenue grew 44%, while Professional Services and Other revenue rose a modest 4%.

Management Comments

DocuSign CEO, Dan Springer, said, “Third quarter revenue growth of 42% year-over-year and operating margin of 22% exceeded our expectations. After six quarters of accelerated growth, we saw customers return to more normalized buying patterns, resulting in 28% year-over-year billings growth… With a $50 billion TAM and 1.11 million customers worldwide, we are confident in the value DocuSign delivers in an increasingly digital anywhere economy.”

See Analysts’ Top Stocks on TipRanks >>

Lower-Than-Expected Guidance

Based on the current economic environment and business momentum, DocuSign forecasts Q4 revenue to fall in the range of $557 million to $563 million, lower than the consensus estimate of $573.79 million. Meanwhile, total billings are expected to be between $647 million and $659 million.

Additionally, full-year fiscal 2022 revenue is projected to be between $2.083 billion and $2.089 billion, lower than the consensus estimate of $2.09 billion. Meanwhile, total billings are expected to be between $2.335 billion and $2.347 billion.

Analysts’ Consensus

With 15 Buys and 1 Hold, the DOCU stock commands a Strong Buy consensus rating. The average DocuSign price target of $336.36 implies 43.8% upside potential to current levels.

Blogger Opinion

TipRanks data shows that financial blogger opinions are 86% Bullish on DOCU, compared to a sector average of 68%.