DocuSign Stock Falls After Beating Results Over Concerns About Declining Billings

DocuSign Stock

DocuSign Stock (NASDAQ:DOCU)

DocuSign (NASDAQ:DOCU) fell 2.5% on Friday after an encouraging start as investors and analysts digested the company’s first-quarter earnings announcement, in which it reported double-digit revenue growth and above analyst forecasts but offered a billings projection that caused some concern.

DocuSign’s sales increased 12% to $661.4M, above forecasts of 9% growth. At the same time, the company’s earnings per share of $0.72 were higher than analysts’ estimates of $0.56.

A drop in the critical billings indicator and expectations for single-digit revenue growth had Seeking Alpha analyst Johnny Zhang concerned that the company was a value trap and losing market share.

After increasing by 56% in FY2021, billing growth for DocuSign stock has slowed significantly to 13% in FY2023, as stated by Zhang. The firm expects a year-over-year increase in billings of 2.1% in FY2024. However, if we consider the billings projection for 2Q FY2024, we may see an increase of 0.46% year over year. The corporation may need to gain ground in the market, even if it still has a 75% stake.

Michael Wiggins de Oliveira, head of Seeking Alpha’s Investing Group, deemed it “difficult not to be bullish” after the firm broke even according to generally accepted accounting principles (GAAP). Though DocuSign’s growth is “barely squeezing out double-digit growth rates,” CEO Allan Thygesen has left his imprint “not on its growth prospects, but his focus on improving DocuSign’s profitability.”

According to Citi (Buy rating), quarterly profits were “excellent,” and overall results were substantially better than predicted.

We note full-year billings guidance was lifted by less than the Q1 beat, signaling some possible pull-forward or additional caution,” the bank stated following the quarter’s significant beat on revenue, billings, and profitability projections.

Due to ongoing economic pressure and low-end market competitiveness, BofA is cautious. Brad Sills, an analyst, wants more certainty that future growth and margin will improve.

Even though Q1 was a good outcome, Piper Sandler rates the DocuSign stock Neutral, saying that although “the forward guide was uninspiring,” it was nonetheless seen as a prudent setting.

According to industry expert Rob Owens, “There is the potential for AI to provide differentiation in what has become a very competitive segment,” the emergence of new products in this area might fuel future growth and revenue opportunities. We’ll have to wait and see what happens, however.

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