DocuSign inventory craters to worst day on report after ‘one of many largest SaaS whiffs in current reminiscence’

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DocuSign Inc. turned into a hot pandemic stock game last year as it capitalized on the need for digital contract tools, but the company lost more than 40% of its valuation on Friday after suggesting the pandemic boom in demand was easing.

Stocks of DocuSign DOCU, -42.22%, fell 42.2% on Friday, which was by far the largest single-day percentage decline on record and had a market cap valued at approximately $ 19.4 billion Dollars annihilated. DocuSign posted earnings Thursday night with a disappointing billing outlook, and Chief Executive Dan Springer called for a “return to more normalized buying patterns” after an “accelerated growth period”.

The stock nearly tripled in 2020, increasing its market cap to over $ 40 billion, but it’s now down 39.2% this year. By comparison, the S&P 500 Index SPX, -0.84%, is up 21% this year, after rising 16% last year.

The company’s report served as “a good reminder that even great companies are taking their proverbial eye off the selling bullet,” Needham analyst Scott Berg wrote in a note in which DocuSign stock was downgraded from “buy” to “hold” became. While DocuSign announced that it would change some elements of its sales organization, Berg said that “fixing these sales problems often takes several quarters”.

Citi Research Analyst Tyler Radke wrote that DocuSign delivered “one of the greatest SaaS” [software-as-a-service] blows in recent memory with a growth of the total billing of 28% well below [the] 34% guide ”during the third fiscal quarter. DocuSign’s billing outlook for the fourth fiscal quarter was 22% at mid-year, well below the consensus value of 32% quoted by Radke in his customer announcement.

“With a largely resilient performance vs. [work-from-home] Colleagues over the past two quarters have been surprised that DOCU is now experiencing significant customer behavior / execution issues on this scale, ”he continued.

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Radke called the report a “These Shifter” although he kept his Buy recommendation for the stock, arguing that DocuSign had a “first mover advantage” in its space and that there was “little evidence” that people were moving back to manual Fall back on agreements. He cut his price target from $ 389 to $ 231.

Evercore ISI analyst Kirk Materne wrote that DocuSign faced difficult comparisons over the last quarter, but the company “simply misjudged the market for demand and resulted in a faster-than-expected slowdown in billing growth.”

But the stock’s sharp decline suggests that “the damage is essentially done for the quarter,” he wrote. Additionally, after speaking with the DocuSign management team, Materne believes that DocuSign’s fourth quarter billing outlook is assuming “no improvement in demand” [generation] vs. 3Q, which could turn out to be conservative. ”

While describing the stock’s sell-off as “a bit of an exaggeration,” Materne admitted that “the reality of this stock has just turned from a story of investors contemplating sustained 30% to 20% growth, and that is is will cause a nice reduction in material. ”

He lowered his target price from $ 320 to $ 200 and wrote: “Until DOCU can show that it can regularly generate demand, not just meet it, the multiple is limited.” Materne maintained an outperformance rating on the stock, citing the long-term potential of e-signature technology, particularly in markets like government where DocuSign is “very early” in its penetration.

DocuSign stock is roughly 52% below its September closing high of $ 310.05.

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