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Could DocuSign Change  Course in 2022?
Stock Analysis & Ideas

Could DocuSign Change Course in 2022?

2021 has been a challenging year for DocuSign (NASDAQ:DOCU), as reflected through the significant selling in its stock price. It’s worth noting that DocuSign stock has lost over 43% of its value in the past six months and is trading in the red year-to-date.

What’s Hurting DocuSign?

DocuSign delivered exceptional growth in 2020, driven by unprecedented customer demand during the COVID-19 pandemic. However, economic reopening and tough year-over-year comparisons weighed on its growth rate in 2021, and in turn, its stock price. 

For context, DocuSign delivered a total revenue growth rate of 58% in Q1 of the current fiscal year. However, its revenue growth rate slowed to 50% in Q2 and 42% in Q3. Moreover, DocuSign’s Q4 revenue guidance reflects a further moderation in the growth rate. 

Billings (a key performance metric) increased by 54% in Q1. However, the billings growth rate decelerated to 47% and 28% in Q2 and Q3, respectively. 

Furthermore, Q4 billings guidance of $647 million to $659 million reflects a further slowdown in the growth rate to 21-23%. 

Acknowledging the slowdown, DocuSign’s CEO Dan Springer said that the company anticipated moderation in growth from the peak amid the pandemic. However, “the environment shifted more quickly” than the company expected. 

Now What? 

It’s worth noting that DocuSign stock has negative indicators from hedge funds and insiders. TipRanks’ Hedge Fund Trading Activity tool shows hedge funds sold about 968K DocuSign stock in the last quarter. Meanwhile, corporate insiders sold DocuSign shares worth $2.9 million during the same period. 

While hedge funds and insiders offloaded DocuSign stock, Needham analyst Scott Berg downgraded it to a Hold from a Buy. Berg noted that DocuSign is making sales changes to generate demand. However, he expects it would require time to benefit from these changes.

Citing similar concerns, Stan Zlotsky of Morgan Stanley also cut his rating on DocuSign stock to a Hold from a Buy. 

Wall Street’s Take

Given its moderating growth rate, Wall Street is cautiously optimistic about DOCU stock. On TipRanks, DocuSign has received 9 Buys, 7 Holds, and 1 Sell recommendation for a Moderate Buy consensus rating. 

Further, DocuSign stock scores a 1 out of 10 on TipRanks’ Smart Score rating system, implying it could underperform market averages.

Meanwhile, the average DocuSign price target of $209.08 indicates 35.9% upside potential to current levels. 

Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

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