DocuSign (DOCU) Falls 5% Despite a Massive Beat-and-Raise, Premium Valuation Justified Says Analyst
DocuSign (NASDAQ: DOCU) stock is trading about 5% lower in early trading Friday as the Nasdaq index corrects on higher Treasury yields. A pullback in DOCU stock price is taking place despite a massive beat-and-raise the tech company delivered for its fourth-quarter.
DOCU said it earned $0.37 per share to top the $0.22 per share expected from market analysts. This quarter’s EPS represents an increase of 208% compared to a year ago. Revenue soared 57% to $430.9 million, again beating the $407.6 million expected from the street.
For the current quarter to end-April, DOCU said it expects to record sales of $434 million at the midpoint of a provided range. This came better than $419.7 million the market expected. For the full-year, the company projects to record sales of $1.97 billion, which is again higher compared to $1.89 billion expected.
"Fiscal 2021 was a milestone year for DocuSign. We became a pillar of the 'anywhere economy' that lets people increasingly do anything in life and work from anywhere," said Dan Springer, CEO of DocuSign.
"In the process, we grew our business nearly 50%, reached almost $1.5 billion in revenues, and achieved a record net retention rate of 123%. We believe this performance represents an acceleration of the ongoing trend towards the digital transformation of agreements."
Morgan Stanley analyst Stan Zlotsky reiterated an “Overweight” rating and raised the price target to $290.00 per share (up from $280.00).
“We see DocuSign carrying plenty of momentum into FY22, with a large install base of eSignature customers to upsell the broader Agreement Cloud vision, which could provide further upside to numbers as we go through the year. The majority of investor focus remains on topline growth metrics, but DocuSign's operating margin and cash generation are not to be overlooked, which we think demonstrated the strong unit economics of the underlying model,” Zlotsky said in a note.
“We look forward to the upcoming Analyst Day on March 24th to get better clarity on the opportunities within core eSign vs the broader Agreement Cloud. In the meantime, we remain OW and see DOCU as well positioned to garner the premium valuation afforded to the best-in-class 30%+ growth SaaS cohort, setting up an attractive 3:1 bull/bear risk/reward skew.”
DOCU delivered another home-run quarter, comments Wedbush analyst Daniel Ives, who maintained its “Outperform” rating and a $300.00 per share price target.
“We note that these results were stellar and the guide for next quarter and FY22 were also strong and well ahead of Street expectations as this story continues to transform into a virtual contract management juggernaut. Given the eye popping fundamental growth and WFH shift, we believe the DOCU story in still in the early innings of playing out as evidenced by our recent checks and last night's results.
“To this point we believe that DOCU is in a sweet spot to continue to receive significant customer spending given its unique solution set amidst an elongated WFH backdrop (we expect 30%-40% employees working remote in a semi permanent structure) with an e-signature shift that has likely permanently changed among enterprises moving forward. The stock being off modestly on a knee jerk reaction we view as a gift for the bulls with worries around sustainable growth post WFH, as DOCU's platform is gaining end to end success around CLM within enterprises and still in the early days of playing out,” Ives concludes.