DocuSign (DOCU) stable quarter prompts upgrade, analyst praise

December 9, 2022 9:05 AM EST
Get Alerts DOCU Hot Sheet
Price: $59.25 --0%

Rating Summary:
    7 Buy, 15 Hold, 3 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 14 | Down: 21 | New: 13
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Shares of DocuSign Inc. (NASDAQ: DOCU) rose 10% in pre-open trading after posting a solid beat in its third quarter and issuing revenue guidance that was in-line with the Wall Street consensus.

Revenue for the e-signature company rose 18% in the quarter for $645.5 million, beating the consensus of $627 million.

Non-GAAP net income per diluted share was $0.57, beating the consensus of $0.42.

For the current quarter, DocuSign sees revenue of $637-$641 million versus the consensus of $640.5 million. For the year, the company sees revenue of $2.493-$2.497 billion, versus the consensus of $2.49 billion.

Following the results, Piper Sandler analyst Rob Owens upgraded the stock from Underweight to Neutral, citing signs of stability and a reasonable valuation.

"While we recognize there is still much work to do, we are increasing our opinion to Neutral as we feel the risk of downside appears limited from this level," Owens said in his note to clients today. The analyst trimmed his price target to $50 from $54.

Other analysts across Wall Street were also pleasantly surprised by the quarter, but like Piper, price targets were mainly trimmed as analysts caught up to the current price.

Standing out among the analyst price-cut crowd was Citi's Tyler Radke, who raised his price target to $72 from $59. The analyst said early renewals and stronger profitability was an "encouraging sign."

"It may be premature to extrapolate Q3 upside, but the early renewals/accelerated growth could suggest customers underestimated post-COVID DOCU envelope demand which, along with company self-help tailwinds (new CEO/GTM stability) selling new use cases can power stronger/more sustainable growth," Radke stated.

The analyst reiterated a Buy rating on DocuSign, but also, to limit risk, he recommended a pair trade with Sell-rated Zoom (NASDAQ: ZM).

By Staff

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