Why BofA Downgrades DocuSign Despite Healthy Q1 Print

Although Docusign Inc DOCU reported healthy first-quarter results, its full-year billings guidance was disappointing, reflecting “choppy execution” according to BofA Securities.

The DocuSign Analyst: Brad Sills downgraded the rating for DocuSign from Buy to Neutral, while reducing the price target from $120 to $72.

The DocuSign Thesis: The Buy rating was based on valuation and expectations of improving execution, resulting in sustained mid-teens billings growth in fiscal FY23, Sills said in the downgrade note.

“We are three quarters into the effort to retool the sales organization and the efforts remains a work in progress. Commentary suggests an additional multi quarter effort from here,” the analyst wrote.

“Guidance for FY23 rev growth of 18%, implies mid-teens growth in H2, which is inconsistent with billings guidance, implying mid/high single digit billings growth in H2. This suggests perhaps further downside to already reset FY23 rev estimates,” he added.

DOCU Price Action: Shares of DocuSign had declined by 22.85% to $68.27 at the time of publication Friday.