DocuSign's COVID-19 Quarantine Benefits Could Last Longer, But Not Enough To Move BofA From Sidelines

DocuSign Inc DOCU delivered upbeat first-quarter results, with strength across the board, driven by shelter-in-place orders boosting customer adoption of its e-signature solutions, according to BofA Securities.

The DocuSign Analyst

Kash Rangan maintained a Neutral rating for DocuSign, raising the price target from $80 to $165.

The DocuSign Thesis

DocuSign reported revenue growth of 39% and billings growth of 59%, markedly higher than BofA’s estimates of 30% and 24% respectively, Rangan said in the note.

He added that the quarter was driven by accelerated adoption of the company’s e-signature offering from a broad range of industries as well as a high dollar net retention rate of 119%.

DocuSign exhibited strong execution in the quarter, with net new customer additions growing by a whopping 72,000 to 661,000. The analyst mentioned the company addresses a relatively nascent market and faces competitive risks.

Management raised the total revenue and billings guidance for fiscal 2021 from $1.27 billion to $1.32 billion and from $1.44 billion to $1.53 billion, respectively, at the mid-point, as heightened demand for e-signature is expected to continue.

“We recognize COVID benefits, but remain cautious on lower margin potential vs best in class SaaS companies,” Rangan wrote.