Analysts downgraded their ratings and price targets for DocuSign Inc. on a softer revenue outlook for Q4 FY21 and FY22.
JPMorgan analyst Sterling Auty downgraded to Underweight from Neutral with a $175 price target, implying a 25.2 percent downside to Thursday’s closing price of $233.82.
Pandemic tailwinds “came to a much faster than expected halt” in Q3.
DocuSign’s sales now need to pivot from a focus on demand fulfillment to demand generation, which will lead to revenue growth seeing a “noticeable deceleration” into the first half of the next fiscal year.
Auty thinks the shares could underperform software peers during this timeframe even though DocuSign’s long-term market opportunity “remains robust.”
UBS analyst Karl Keirstead downgraded to Neutral from Buy with a price target of $170, down from $350, implying a 27.3 percent downside.
The company reported a “thesis-changing print” with billings growth of just 28 percent and guidance for just 23 percent billings growth in Q4.
The analyst lowered estimates for FY23, saying his prior thesis that DocuSign could maintain 30 percent-plus billings and revenue growth for years even as employees returned to the office “was clearly wrong.”
Piper Sandler analyst Rob Owens downgraded to Neutral from Overweight with a price target of $200, down from $330, implying 14.5 percent downside.
The company last night posted a billings miss and only a modest revenue beat as it failed to maintain momentum as demand normalization happened faster than expected post-pandemic.
The analyst says DocuSign’s “weak” guidance adds to the uncertainty.
He has a lack of confidence in the timeline of DocuSign’s turnaround, “setting 2022 up for a murky year.”
DocuSign shares closed lower by 42.22 percent at $135.09 on Friday.