DocuSign Third Quarter Blows Past Prior-Year Results, Street Views; Analysts See E-Signature Trend Lasting Beyond Pandemic

8:28AM ET 12/04/2020 MT Newswires
DocuSign (DOCU) reported fiscal third-quarter earnings and revenue well above year-earlier results and analysts' expectations, boosting fiscal-year revenue guidance as the electronic signature company continues to benefit from documents and processes being moved to digital formats, a shift analysts see lasting beyond the COVID-19 pandemic.

"Given the eye-popping fundamental growth and WFH shift, we believe the DOCU story (is) still in the early innings of playing out as evidenced by our recent checks and last night's results," Wedbush analysts Daniel Ives and Strecker Backe said in a Friday note to clients, referring to working from home.

DocuSign is "in a sweet spot to continue to receive significant customer spending given its unique solution set amidst an elongated WFH backdrop with an e-signature shift that has likely permanently changed among enterprises moving forward," they added. Wedbush kept its outperform rating on the stock with a $270 price target while describing DocuSign as one of the firm's "favorite next-generation software plays."

For its fiscal third quarter ended Oct. 31, the San Francisco-based company reported adjusted earnings per share of $0.22, double the $0.11 posted a year earlier and topping the consensus on Capital IQ for $0.13. Revenue climbed 53% year-over-year to $382.9 million, surpassing analysts' estimate of $361.3 million, as subscription revenue rose 54%. Billings jumped 63%.

For its fiscal fourth quarter ending Jan. 31, DocuSign forecast total revenue of $404 million to $408 million, straddling the Street view for $407.9 million.

For the fiscal year, the company said it now sees total revenue of about $1.43 billion, up from its previous forecast for about $1.38 billion. Analysts' mean estimate had been at $1.39 billion and has since moved up to $1.43 billion.

RBC Capital Markets sees the stock, which has already tripled in the year to date, going higher yet. The firm, which has an outperform rating on DocuSign's shares, raised its price target on the shares to $325 from $275 after the third-quarter report.

DocuSign's third quarter was "very strong," RBC analyst Alex Zukin said in a note to clients. "What is even more impressive in our minds is that this is being driven almost entirely by an acceleration of the core e-signature business with the company being confident that it is still very modestly penetrated in its TAM (which has expanded significantly) that they can maintain growth above pre-pandemic levels in a post-pandemic world," Zukin said, referring to the total addressable market.

An RBC survey found nearly two-thirds of respondents suggested e-signature technologies were critical to their day-to-day jobs, Zukin said. RBC sees "a large runway with limited competitive threats for DocuSign," and believes the company is still undervalued, he said.

Price: 241.01, Change: +10.00, Percent Change: +4.33