DocuSign stock (DOCU) is now down close to 20% as below par guidance disappoints

DocuSign stock (NASDAQ: DOCU) fell close to 20% from its year to date high after following its below-par full-year revenue and billing guidance.

This comes even as the e-signature software company reported strong first-quarter earnings that exceeded Wall Street expectations.

DocuSign’s Q1 earnings surpass expectations

In the first quarter, DocuSign reported earnings per share (EPS) of 82 cents, surpassing Wall Street’s forecast of 79 cents.

The company’s revenue increased by 7% to $709.6 million, slightly above the expected $707 million. Additionally, subscription revenue rose 8% to $691.5 million, exceeding analysts’ expectations.

Billings and net income show positive growth

DocuSign’s billings for the quarter rose 5% to $709.5 million, surpassing its target range of $685 million to $695 million.

This growth in billings indicates a healthy demand for the company’s services. Net income for the quarter was $33.8 million, a significant improvement compared to breaking even the previous year.

This positive financial performance underscores the company’s efforts to stabilize the business and improve profitability, as emphasized by CEO Allan Thygesen.

Disappointing full-year guidance impacts stock price

Despite the strong quarterly performance, DocuSign’s full-year revenue forecast of $2.92 billion to $2.93 billion fell just below Wall Street’s target, contributing to the after-hours stock decline.

Full-year billings were projected at $2.98 billion to $3.03 billion, which also failed to meet investor expectations.

This guidance reflects the challenges the company faces in maintaining its growth momentum amidst increasing competition and market saturation.

Stock buyback and strategic initiatives

In an effort to boost shareholder value, DocuSign authorized a $1 billion stock buyback, adding to its existing repurchase program.

This move is intended to offset the dilution of shares and signal confidence in the company’s future prospects. However, the mixed reactions from investors highlight concerns over the company’s ability to sustain long-term growth.

Focus on stabilizing and profitability

CEO Allan Thygesen reiterated the company’s focus on stabilizing the business and enhancing profitability.

The first-quarter results indicate progress in these areas, with improved net income and higher-than-expected billings.

However, the lower-than-expected full-year guidance suggests that DocuSign must continue to navigate challenges in the market and adapt its strategies to sustain growth.

Market reaction and future outlook

The 20% drop in DocuSign’s stock reflects investor concerns about the company’s ability to meet its growth targets for the full year.

The market’s reaction underscores the importance of meeting or exceeding revenue and billing forecasts to maintain investor confidence.

Going forward, DocuSign’s ability to innovate and expand its market share will be crucial in determining its long-term success.