Conservative guidelines rejected, DocuSign (DOCU.US) cut target price by major Wall Street banks

The Zhitong Finance App learned that electronic signature service provider DocuSign (DOCU.US) fell nearly 7% at the beginning of trading on Friday. Although the company announced third-quarter results and guidelines called “steady” by some analysts, many Wall Street institutions lowered their target prices, putting pressure on market sentiment.

Wedbush analysts pointed out in the research report that DocuSign “completely exceeded expectations” this quarter, and both revenue and profit were better than market expectations, thanks to strong demand for identity access management (IAM) and electronic signature services. However, they also stressed that the company's conservative outlook will overshadow the highlights of the performance. “Although the company handed over a solid quarterly questionnaire, we believe the revised guidelines are still conservative.” Wedbush maintained a “neutral” rating on the stock, but lowered its price target from $85 to $75.

Piper Sandler also lowered DocuSign's target price, from $90 to $75, reflecting the market's cautious attitude towards the company's prospects.

For the quarter ending October 31, DocuSign achieved adjusted earnings of $1.01 per share, exceeding analysts' expectations of $0.92; quarterly revenue increased 8.4% year over year to US$818 million, which is also higher than the market estimate of US$807 million. Of this, subscription revenue was US$801 million, and professional services and other revenue was US$17.4 million.

Looking ahead to the fourth fiscal quarter, the company's estimated revenue range is US$825 million to US$829 million, which is slightly lower than the market forecast of US$827.4 million. Subscription revenue is expected to be between $808 million and $812 million; bill revenue is expected to be between $992 million and $1 billion; and adjusted gross margin is estimated at 80.8% to 81.1%.

Despite conservative short-term guidance, DocuSign raised its full-year forecast. The company expects annual revenue to be between US$3.208 billion and US$32.12 billion, higher than the previous range of US$3.19 billion to US$3.2 billion; the estimated subscription revenue also increased to US$3.14 billion to US$3.144 billion, which is better than the previous target of US$3.12 billion to US$3.13 billion.

Overall, DocuSign performed strongly in the third quarter, but between growth momentum and conservative management forecasts, Wall Street views were divided, and the target price reduction became the main factor affecting stock prices. Investors will continue to watch the company's stability in terms of subscription business, billing growth, and profit margin maintenance.