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A UBS analyst maintained a Neutral rating on DocuSign Inc (NASDAQ:DOCU) but lowered the firm’s price target to $65 from $70 in a note to investors on Tuesday.
The analyst released the note ahead of DocuSign’s earnings report. UBS spoke to three partners and four customers of DocuSign to “better assess” the company’s demand backdrop.
“Overall, our checks remain cautious and, if anything sounded new, it was the risk of “right-sizing” contracts upon renewal as well as rising competition from Adobe,” the analyst said. “Most investors seem braced for another FY23 guide-down.”
The analyst explained: “The feedback on high North American e-signature penetration (as one partner said, “I think the F500 is good to go at this point”) as well as sluggish CLM product growth sounded the same as we heard 3 months ago, as did the overall growth outlook from most partners and customers. What sounded “new” were a) anecdotes about “right-sizing” DocuSign contracts upon renewal, even though one partner argued that this process may be bottoming (we’re not convinced), and b) a pick-up in the number of anecdotes about share losses to Adobe.”
The UBS analyst went on to explain that investor consensus is that downside risk to the 2Q/Jul guidance seems modest, but 4Q/Jan billings guidance, in particular, “looks too high” in light of the renewal expansion risks “coupled with sales execution risks related to recent leadership turnover (the CEO and COO left in June).”
