Shares of DocuSign (DOCU) fell more than 23% in the extended trading session on June 9, after the company released its fiscal Q1 2023 earnings for the period ended April 30. The company released the earnings report after the closing bell.
San Francisco-headquartered DocuSign provides software solutions that enable clients to manage electronic agreements such as signing digital documents.
Earnings at a Glance
Revenue rose 25% year-over-year to $588.7 million and exceeded the consensus estimate of $581.76 million. Adjusted EPS of $0.38 declined from $0.44 in the same quarter last year and missed the consensus estimate of $0.46. The company ended the quarter with $1.06 billion in cash.
The CEO of DocuSign, Dan Springer, said, “We delivered solid first-quarter results, adding nearly 67,000 new customers, bringing our total global customer base to 1.24 million. We also bolstered our leadership team with key new hires who…are ensuring we’re well-positioned to grow and scale our business.”
Q2 and Fiscal 2023 Outlook
For Q2, DocuSign anticipates revenue in the range of $600 million to $604 million, compared to the Street’s estimate of $602 million. It sees billings ranging from $599 million to $609 million.
For Fiscal 2023, which ends in January, DocuSign has maintained its previously shared revenue guidance of $2.47 billion to $2.48 billion. However, the company has lowered its billing guidance to $2.52 billion to $2.54 billion from $2.71 billion to $2.73 billion anticipated earlier.
Challenges Ahead
Business boomed for DocuSign at the height of the COVID-19 pandemic as lockdowns fueled a rise in electronic transactions. However, the pandemic-driven boom is waning as lockdowns ease and people return to offices.
As with many other businesses, DocuSign is also struggling with macroeconomic headwinds, including challenges caused by the war in Ukraine. The management is responding to the challenging business environment by controlling expenses, which includes going slow on hiring.
“While we continue to invest in our employee base, we are moderating the tempo of our hiring plans to appropriately balance growth and profitability,” the CEO said.
Wall Street’s Take
On June 6, JMP Securities analyst Patrick Walravens reiterated a Buy rating on DocuSign with a price target of $151, which implies 72.85% upside potential.
On TipRanks, the stock has a Hold consensus rating based on five Buys, nine Holds, and two Sells. DocuSign’s average price target of $92.31 implies 5.7% upside potential to current levels.
Bloggers’ Stance
TipRanks data shows that financial bloggers are 87% Bullish on DOCU, compared to the sector average of 66%.
Conclusion
The macroeconomic headwinds have hit businesses across the board, not just DocuSign. While DocuSign may lose the benefit of the pandemic-fueled demand, the company’s prospects look bright in the long term. It has only captured a tiny portion of the $50-billion addressable market. The continuing adoption of cloud services by enterprises particularly bodes well for DocuSign’s future.
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