Docusign Reports Beat-And-Raise Quarter, But These Analysts Have Some Concerns

Shares of Docusign Inc DOCU were climbing over 3.2% in early trading on Friday, after the company reported upbeat second-quarter results.

The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.

• RBC Capital Markets analyst Rishi Jaluria reiterated a Sector Perform rating, while raising the price target from $52 to $57.
• JPMorgan analyst Mark Murphy maintained an Underweight rating and price target of $50.
• JMP Securities analyst Patrick Walravens reaffirmed a Market Outperform rating and price target of $84.
• Needham analyst Scott Berg reiterated a Hold rating on the stock.

Check out other analyst stock ratings.

RBC Capital Markets: Docusign reported revenues of $736.0 million. This represents 7% year-on-year growth, beating consensus of $727.2 million. The company's non-GAAP earnings came in at 97 cents per share. That’s higher than the consensus of 81 cents per share, Jaluria said in a note.

The quarter reflected stable revenue growth and NRR, and "decent" large customer net add, although billings were "muted," the analyst stated. Total and subscription revenue guidance was raised by $20 million at the midpoint, "well ahead of the $9M Q2 beat," he further wrote.

JPMorgan: While Docusign seems to be on track for billings growth to trough in the second quarter and "reaccelerate a bit" into the second half of the year, "we don't see the financial results on their own as reflecting significant progress toward material reacceleration and inflection in the business," Murphy wrote in a note.

The company expects pro forma operating margin to contract slightly in the back half of the year, "as it invests to support the continued rollout of IAM, though it continues to expect to exit the year with improving operating margins on a y/y basis," the analyst said. Docusign's third-quarter billings guidance, of $715 million at the midpoint, came in short of consensus of $719 million, he added.

JMP Securities: Docusign's revenue growth decelerated to 7% year-on-year in the second quarter, from 8% in the previous quarter. Billings growth declined to 2% year-on-year growth, from 5% growth in the first quarter. Net retention of 99% came in flat versus the prior quarter, Walravens said.

The company's adjusted operating margin expanded to 32%, from 29% in the first quarter and came in above the consensus of 28%, the analyst stated. Docusign is “at the very beginning of its IAM product cycle, with customer deal count and bookings increasing month over month with August totaling more than July and June combined," he further wrote.

Needham: Docusign’s operating margins expanded by 600 basis points (bps) to 30.7%, excluding a one-time benefit, Berg said. He added, however, that the company is operating in a "weak end market."

Docusign's "mediocre customer adds and retention suggest e-signature is unlikely to drive double-digit revenue growth going forward," the analyst stated. "Like management, we are bullish on the IAM/CLM opportunity," he further wrote. However, the “re-acceleration from a mid-single digit growth profile remains a year away.”

Price Action: Shares of Docusign had risen by 3.2% to $58.76 at the time of publication on Friday.

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Image: Courtesy of Docusign