Early in December last year, cloud-based electronic signature solutions provider DocuSign (NASDAQ: DOCU) shot itself in the foot by announcing a dull 4Q22 guidance. As a result, despite the company crushing its 3Q22 earnings and revenues, investors fled in panic from the seemingly dimming prospects of the DOCU stock.
Obstacles to Stock Prices Make Everyone Wary
Management guided a revenue growth of 30% year-over-year, which is much lesser than the 42% growth recorded in 3Q22. The stock dropped 42.2% the following day, and DOCU has recorded a 43.59% decline in share prices over the past year. It is widely believed that the stock will take a while to regain conviction among investors and recover from the pricing shock.
As if that wasn’t enough, a month after the earnings release, on January 5, the news of a possible interest rate hike from the Fed sent shockwaves across the U.S. market, with the major indexes like the NASDAQ Composite, Dow Jones Industrial Average (DJIA), and S&P 500 (SPX) declining sharply, led by technology sector sell-offs. This again hit DocuSign stock.
Another hindrance to stock price growth is the company’s lack of any plan to pay dividends. DocuSign has never declared, nor plans to roll out cash dividends in the near future, making stock appreciation the only way to achieve returns on investment. This keeps a major investor cohort at bay from the stock.
Competition is an Added Pressure
Another area of concern for the company is the intense competition that DocuSign faces from its peer in the e-signature market —Adobe (NASDAQ: ADBE).
The company, therefore, remains under constant competitive pressure to keep up with product quality, pricing, and technology, which are expensive.
Wall Street Treads Carefully
Recently, Piper Sandler analyst Rob Owens reiterated a Neutral rating on DocuSign, while lowering the price target to $175 from $200.
The consensus is also not too bullish on the company. Among the 22 Street analysts covering the DOCU stock, 16 maintain a Buy rating and 6 carry a Hold rating; giving the stock a Moderate Buy average rating. The DOCU stock forecast shows the average price to be $207.15 on average, currently.
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