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DocuSign Stock Bucks ‘Stay-at-Home’ Slump, Rises After Q2 Earnings

DocuSign (NYSE: DOCU) stock is trading higher in US premarket price action today after it reported earnings for its fiscal second quarter of 2023. The rise is a welcome break for investors as DOCU has lost almost two-thirds of its market cap this year and hit a new 52-week low yesterday.

While many of the so-called “stay-at-home” companies like Zoom Video Communications had crashed after their earnings release, DocuSign is sharply higher after reporting an earnings beat and providing upbeat guidance.

DocuSign reported revenues of $622 million in the fiscal second quarter that ended in July. The revenues rose 22% YoY and were ahead of the $602 million that analysts were expecting. Its adjusted EPS was 44 cents in the quarter. While the metric was below the 47 cents that it posted in the corresponding quarter last year, it was nonetheless ahead of 42 cents that analysts were expecting.

Commenting on the earnings, DocuSign’s Interim CEO Maggie Wilderotter said, “We have a $50 billion market opportunity, an industry leading digital agreement platform, strong market position, and an experienced leadership team. I have total confidence our team will successfully deliver for all stakeholders.”

Wilderotter took over the position in June after DocuSign’s then-CEO Dan Springer resigned following poor financial results. DocuSign stock had spiked following the news of his resignation.

DocuSign Provided Better Than Expected Guidance

Several former stay-at-home winners have provided dismal earnings guidance. However, DocuSign’s guidance was better than expected. It guided for revenues between $624-$628 million in the fiscal third quarter which was slightly ahead of the $625 million that analysts were expecting.

It also maintained its full fiscal year revenue guidance of $2.470 billion to $2.482 billion. While several companies have been downwardly revising their guidance for the year due to the economic slowdown, DOCU maintaining its guidance looks impressive.

Over the last few months, several analysts have downgraded DOCU stock. After the fiscal second-quarter earnings release, Citigroup maintained its buy rating on DocuSign stock while lowering the target price from $90 to $68.

DocuSign added 44,000 new customers in the quarter and ended the quarter with 1.28 million global paying customers. The company is looking to lower its expenses in the second half of the fiscal year to meet its previously guided operating margin guidance of 16-18%.

It said, “We are reviewing all categories of expenses and will adjust our spending accordingly. These expected expense reduction initiatives will create capacity for the right investments for our expected scale growth.”

The company sees a $50 billion global TAM (total addressable market) for its services. It ended the quarter with total cash and cash equivalents of $1.1 billion. It continues to hunt for a new CEO and termed the current period as “transitory.”

Growth Stocks Have Faced the Heat in 2022

Growth stocks have faced the heat in 2022 amid rising interest rates. Higher rates lower the current values of future cash flows. Value stocks have outperformed the markets over the last year and several analysts advise risk-averse investors to shift to value stocks given the current macroeconomic scenario. We have a guide on how to buy stocks through PayPal.

Interest rates are rising in most economies with the notable exception of China which is instead lowering rates to spur its sagging growth. Yesterday, the European Central Bank also raised its policy rates by 75 basis points. The US Fed is also expected to raise rates by 75 basis points later this month. It has already raised rates by 2.25% so far in 2022.

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