Analysts Remain Divided Over DocuSign's Recent Downsizing Plans

DocuSign, Inc DOCU announced a Board-approved reduction-in-force of roughly 9% of its workforce yesterday.
Needham analyst Scott Berg reiterated a Hold on the stock.
He believes the move right-sizes Docusign's operations for near-term growth he expects to remain materially below pandemic levels.
However, he found the timing a bit interesting, given that newly announced CEO Allan Thygesen has yet to start.
The analyst assumed the new CEO fully consulted and signed off on the plan since he would be critical of its execution.
While management provided few details, he expects most of the reduction will not impact client-facing or client-success functions.
The analyst did not update his model at this time but believes the RIF will reduce operating expenses by 4% - 5%, equating to $80 million - $100 million in annual savings or $0.39 - $0.48 per share in EPS once fully implemented.
RBC Capital analyst Rishi Jaluria cut the price target on DocuSign to $55 from $65 and maintained a Sector Perform.
DocuSign's restructuring plan is "slightly negative," even though it gives investors comfort on margins and supports the management's earnings call commentary that DocuSign overhired during the pandemic.
However, he is "more cautious" about DocuSign's near-term as the cost-cutting comes despite its sales organization's high rate of churn.
Price Action: DOCU shares traded lower by 0.99% at $54.76 on the last check Thursday.

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