What Happened:
Shares of e-signature company DocuSign (DOCU) jumped 4.8% in the afternoon session after the company reported a "beat and raise" quarter. Third quarter results topped analysts' billings and revenue expectations. Profits were also better-than-expected in the quarter, showing not only topline momentum but expense efficiency and leverage. Despite the challenging macro environment, the company observed signs of business stabilization, highlighting notable improvement in key topline metrics tracking demand from large customers. However, DocuSign also called out headwinds, including spending optimization and IT budget scrutiny, which impacted expansion from existing customers, resulting in a deceleration in dollar net retention (100% vs. 102% in the previous quarter).
Looking ahead, next quarter's revenue guidance came in higher than Wall Street's estimates. For the full year, guidance was raised across the board. Zooming out, this was a decent quarter, showing that the company is staying on target despite more demanding business conditions.
Is now the time to buy DocuSign? Access our full analysis report here, it's free.
What is the market telling us:
DocuSign's shares are very volatile and over the last year have had 12 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 months ago, when the stock gained 5.4% on the news that the company's first-quarter results surpassed analysts' expectations on multiple fronts, including revenue, subscription revenue, billings, and earnings per share. The outperformance was particularly notable in billings, which exceeded estimates by over 8%. Gross margin also improved, and free cash flow came in strong. Moving ahead, revenue guidance for the next quarter and the full year came in above Consensus. Similarly, non-GAAP operating margin guidance for the next quarter and the full year also exceeded expectations. Like other companies, DocuSign touted AI as a "competitive advantage". The company also welcomed a new board member, Anna Marrs, who has a wealth of experience in leading roles at companies like American Express, Standard Chartered Bank. and McKinsey & Company. Overall, DocuSign delivered a strong performance, with significant improvement in key operating metrics.
DocuSign is down 11.6% since the beginning of the year, and at $50.17 per share it is trading 26% below its 52-week high of $67.83 from February 2023. Investors who bought $1,000 worth of DocuSign's shares 5 years ago would now be looking at an investment worth $1,233.
Do you want to know what moves the stocks you care about? Add them to your StockStory watchlist and every time a stock we cover moves more than 5%, we provide you with a timely explanation straight to your inbox. It's free and will only take you a second.