While most companies have already reported their Q3 results, a few are now giving updates as to what they expect going into Q4. One of those companies is DocuSign (NASDAQ: DOCU), whose shares plummeted just before the weekend after the company announced weaker-than-expected Q4 guidance. What’s more, analysts were quick to downgrade the stock on the news, only further pushing down prices.
Going into the second half of 2021, DocuSign expected that revenue would continue to stray strong. However, the company has since revised its initial expectations for the last quarter of the year, predicting only $557 million to $563 million in Q4 income. In contrast, Wall Street was expecting somewhere around $573.8 million.
That’s still an improvement from Q3, although less than originally hoped for. During its third quarter, DocuSign reported $545.5 million in revenue, managing to beat analysts’ $531 million average target. The fact that it managed to handily surpass last quarters’ predictions further reinforces the disappointment some shareholders feel with this news, even though revenue has still been steadily increasing quarter over quarter.
“While we had expected an eventual step down from the peak levels of growth achieved during the height of the pandemic, the environment shifted more quickly than we anticipated,” said DocuSign CEO Dan Springer during the earnings call.
In another sudden announcement, the company also confirmed that DocuSign’s CFO, Michael Sheridan, resigned from the company on November 30th. While not related to this particular announcement, the sudden departure of a senior-level executive doesn’t help reassure investors that everything is going alright.
It certainly didn’t help Wall Street, which reacted to the news quite badly. Analysts at JPMorgan, Piper Sandler, UBS, and Wedbush all ended up lowering their rating for the stock. Citigroup analyst Tyler Radke still has a buy rating, although he cut his share target down from $389 to just $231. He also added that this recent earnings miss for DocuSign was “one of the biggest [software as a service] whiffs in recent memory.”
Other analysts were equally as harsh on DocuSign as CitiGroup’s were. JPMorgan and Piper Sandler both left scathing comments in regards to the company, warning that various factors, including the aftereffects of the pandemic, have caught up to the software company. Speaking in an interview just before the weekend, CEO Springer ended up responding to these remarks, expressing confidence that things would be back to normal for the company soon in 2022.
Shares of DocuSign were down as much as 40% on Friday following the debacle. Prior to this plunge, the company was up a modest 4% so far this year. That’s underperforming heavily when compared even to the Nasdaq, which is up closer to 20% since 2021 started. While the majority of analysts still have buy ratings on the stock, there’s been a steady shift towards more neutral and bearish views as the past few months have gone by.
DocuSign Company Profile
DocuSign offers the Agreement Cloud, a broad cloud-based software suite that enables users to automate the agreement process and provide legally binding e-signatures from nearly any device. The company was founded in 2003 and completed its IPO in May 2018. – Warrior Trading News
