When it Rains it Pours: DocuSign (DOCU) Stock Crashes 30% After 'Debacle' Quarter, 5 Analysts Downgrade as it May Take a Few Quarters to Recover

December 3, 2021 8:45 AM EST
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Price: $130.49 --0%

Rating Summary:
    12 Buy, 9 Hold, 1 Sell

Rating Trend: Down Down

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Shares of DocuSign (NASDAQ: DOCU) are down over 31% in pre-open Friday after the company reported disappointing Q4 and full year guidance that signals slowing demand.

DocuSign reported Q3 EPS of $0.58 to beat the analyst estimate of $0.46. Revenue for the quarter came in at $545.5 million versus the consensus estimate of $530.63 million.

For this quarter, DOCU is calling for sales between $557 million and $563 million below the $573.79 million consensus.

DocuSign is projecting full-year revenue of $2.083 to $2.089 billion, versus the consensus of $2.09 billion.

Dan Springer, the CEO of DocuSign, believes the slowdown is a result of more normalized buying patterns after six quarters of accelerated growth.

At least 4 analysts downgraded DOCU shares in the aftermath of Q3 results and offered guidance.

Needham & Company analyst Scott Berg downgraded to Hold from Buy as results showed that “even outstanding companies take their proverbial eye off the sales ball.”

“We have found fixing these sales issues often requires several quarters. DOCU reported 3QF22 billings growth below guidance (+28% versus 55% and 46% the last two quarters) due to end-market demand slowing much faster than expected just 90 days ago. In response to the slowing pandemic driven demand influx, DOCU is making changes to its sales organization to revert its sales model to one that is more proactively generating demand…As a result of sales changes needing time and valuation risk, we downgrade to Hold,” Berg said in a client note.

Wedbush analyst Daniel Ives also downgraded to Neutral from Outperform and lowered the price target to $200.00 per share from the prior $340.00 after a “debacle” quarter.

“Last night was a debacle quarter from DOCU as the high growth e-signature play hit a major growth hurdle during its October quarter with customer buying behavior that appeared to change overnight. Instead of billings handily beating the Street, the company missed on this key metric as it appears management was caught blindsided by the quickly changing sales environment which is a worrying trend for the Street,” Ives wrote in a note sent to clients.

Docu shares were up 5.1% YTD heading into earnings.

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