DocuSign Q3 preview: Where next for the DocuSign stock?

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Josh Warner
By :  ,  Market Analyst

When will DocuSign release Q3 earnings?

DocuSign will release third quarter earnings after US markets close on Thursday December 2.

 

DocuSign Q3 earnings preview: what to expect from the results

DocuSign has come into its element during the pandemic, which has accelerated adoption of its eSignature tool that allows contracts and deals to be signed digitally in an effort to eliminate paper and automate end-to-end agreement processes. The company has over one million customers, over one billion users, and saw revenue jump 50% year-on-year in the second quarter, the majority of which is recurring subscription revenue. In fact, revenue this year is expected to be more than double what was delivered in the year to the end of January 2020 – before the pandemic hit.

Below is a table outlining DocuSign’s guidance for the third quarter and how it compares to last year. Notably, revenue growth is expected to slow from what was delivered in the second quarter to a range of 37% to 39% year-on-year:

($, millions, except percentages)

Q3 2022

Q3 2021

Total Revenue

526 to 532

382.9

Subscription Revenue

505 to 511

366.6

Billings

585 to 597

440.4

Adjusted Gross Margin

79% to 81%

79%

Adjusted Operating Margin

17% to 19%

13%

(Source: DocuSign)

Wall Street expects DocuSign to report record revenue of $531.6 million, subscription revenue of $510.1 million and billings of $586.9 million, according to consensus numbers from Bloomberg.

In terms of earnings, analysts forecast DocuSign will report adjusted EPS of $0.46 compared to just $0.22 last year. Meanwhile, they expect DocuSign to squeeze out reported EPS at the bottom-line of $0.03, which would compare to the $0.31 loss booked the year before.

Although many countries have been gradually easing restrictions and people have been returning to offices, the new Omicron variant threatens to plunge the world back into lockdowns. Although scientists are racing to find out exactly what we are dealing with, a new variant that can evade existing vaccines could lead to a resurgence in remote working, which would lead to greater demand for DocuSign’s tools. Still, the long-term fundamentals for DocuSign’s tools remains strong regardless as it makes everything from signing a new employment contract to a mortgage simpler, quicker and safer.

Investors will also want to hear about how its expanded partnership with Salesforce is performing, having integrated its tools with Slack, as well as any progress being made by its new initiative launched in October named DocuSign Ventures, which is investing in a number of smaller companies operating within the agreement process such as BlackBoiler, DataGrail and Snapdocs.

Turning to the outlook, below is a table outlining DocuSign’s guidance for the 12 months to the end of January, 2022, and how it compares to what was delivered in the last financial year:

($, millions, except percentages)

FY 2022

FY 2021

Total Revenue

2,078 to 2,088

1,500

Subscription Revenue

1,995 to 2,005

1,400

Billings

2,409 to 2,429

1,700

Adjusted Gross Margin

79% to 81%

79%

Adjusted Operating Margin

16% to 18%

12%

(Source: DocuSign)

Wall Street currently believes DocuSign will hit the upper-end of its guidance range this year and achieve annual revenue of $2.09 billion, subscription revenue of $2.00 billion and billings of $2.42 billion. Analysts forecast adjusted EPS of $1.75 will jump from just $0.90 the year before, but for DocuSign to remain in the red at the bottom-line with a reported loss per share of $0.21, which would compare to a $1.31 loss last year.

DocuSign shares have more than trebled in value since the start of 2020 as investors piled-in to stay-at-home stocks and gained exposure to the acceleration in growth seen over the past two years, although it has shed over 19% in value since hitting all-time highs in August. Still, the 21 brokers that cover the stock remain bullish with a target price of $324.02, implying there is over 26% potential upside and that the company can go on to hit new all-time highs over the next 12 months.

 

Where next for DOCU stock?

The DocuSign share price rose to an all-time high in August of $315 which it refreshed in early September before trending lower. 

The share price trades below its multi-month falling trendline and fell below its 50 sma. The price found a floor at $235 last week and rebounded higher.  

The rebound is attempting to retake the 100 sma at $252, it would take a close above this level to bring the falling trendline at $277 and the 50 sma at $279 into focus. A move above $288 is needed for the bias to become bullish. 

Rejection at the 100 sma could see the price look to test the November low of $235, opening the door to $204, the June high. 

Where next for the DocuSign share price?

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