DocuSign stable quarter prompts upgrade, analysts praise

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By AiVIF.com Staff

Shares of DocuSign (NASDAQ:DOCU) rose 10% in pre-open trading after posting a solid beat in its third quarter and issuing revenue guidance that was in line with the Wall Street consensus.

Revenue for the e-signature company rose 18% in the quarter to $645.5 million, beating the consensus of $627M.

Non-GAAP net income per diluted share was $0.57, beating the consensus of $0.42.

For the current quarter, DocuSign sees revenue of $637M - $641M versus the consensus of $640.5M. For the year, the company sees revenue of $2.493B - $2.497B, versus the consensus of $2.49B.

Following the results, Piper Sandler analysts upgraded the stock from Underweight to Neutral, citing signs of stability and a reasonable valuation.

"While we recognize there is still much work to do, we are increasing our opinion to Neutral as we feel the risk of downside appears limited from this level," they said in their note to clients today. The analysts trimmed their price target to $50 from $54.

Other analysts across Wall Street were also pleasantly surprised by the quarter, but like Piper, price targets were mainly trimmed as analysts caught up to the current price.

Standing out among the price-cut crowd were Citi analysts, who raised their price target to $72 from $59. The analysts said early renewals and stronger profitability were an "encouraging sign."

"It may be premature to extrapolate Q3 upside, but the early renewals/accelerated growth could suggest customers underestimated post-COVID DOCU envelope demand which, along with company self-help tailwinds (new CEO/GTM stability) selling new use cases can power stronger/more sustainable growth," they stated.

The analysts reiterated a Buy rating on DocuSign, but also, to limit risk, they recommended a pair trade with Sell-rated Zoom (NASDAQ:ZM).