Shares of DocuSign Inc (DOCU) surged over 3.2% in early trading on Friday, fueled by the company’s positive second-quarter earnings report. This upbeat performance comes amidst a flurry of earnings announcements this season, generating considerable market interest.
Analysts offered a mixed bag of opinions following the report. RBC Capital Markets analyst Rishi Jaluria maintained a “Sector Perform” rating but increased the price target from $52 to $57. He noted DocuSign’s 7% year-on-year revenue growth, exceeding consensus estimates of $727.2 million, and a non-GAAP earnings per share of 97 cents, surpassing the predicted 81 cents. Jaluria highlighted stable revenue growth and net retention rates, along with decent large customer additions. However, he acknowledged that billings were “muted.” He expressed optimism about the company’s future, citing an upward revision of $20 million in total and subscription revenue guidance, exceeding the $9 million Q2 beat.
JPMorgan analyst Mark Murphy, however, remained cautious, maintaining an “Underweight” rating and a $50 price target. While he recognized DocuSign’s potential for billings growth to rebound in the latter half of the year, he expressed doubt about a substantial reacceleration in the business. Murphy pointed out that the company expects a slight contraction in pro forma operating margins during the second half as it invests in supporting its Identity and Access Management (IAM) rollout. He also noted that the third-quarter billings guidance of $715 million came in slightly below consensus expectations of $719 million.
JMP Securities analyst Patrick Walravens took a more optimistic stance, reaffirming a “Market Outperform” rating and a $84 price target. He acknowledged a slowdown in revenue growth to 7% year-on-year from 8% in the previous quarter, and a decline in billings growth to 2% from 5% in the first quarter. However, Walravens highlighted the company’s stable net retention rate of 99% and the expansion of adjusted operating margin to 32% from 29% in the prior quarter, exceeding consensus expectations of 28%. He emphasized that DocuSign is in the early stages of its IAM product cycle, with increasing customer deal counts and bookings.
Needham analyst Scott Berg maintained a “Hold” rating on the stock. He praised the company’s 600 basis point expansion in operating margins to 30.7%, excluding a one-time benefit. However, he cautioned that DocuSign is operating in a weak end market and that its mediocre customer additions and retention suggest that e-signature alone is unlikely to drive double-digit revenue growth going forward. While Berg acknowledged the potential of the IAM/Customer Lifecycle Management (CLM) opportunity, he expressed that a significant reacceleration from a mid-single digit growth profile remains at least a year away.
Despite the mixed analyst opinions, DocuSign’s stock climbed 3.2% to $58.76 by the time of publication on Friday. The company’s upbeat second-quarter earnings appear to have outweighed concerns about the near-term growth outlook, at least for now.
