DocuSign (NASDAQ: DOCU) released its Q4 earnings on Thursday, March 10, 2022, in which the company beat analyst estimates for both revenue and earnings but issued weak guidance.
What to look for
Earnings: Stockearning’s Estimated EPS for the fourth quarter was $0.47, but the company produced earnings of $0.48, up from $0.37 a year ago. On a GAAP basis, the company lost $0.15 per share. For the full year, non-GAAP profits were $1.98 per share, while on a GAAP basis, DocuSign lost $0.36 per share. . Historical EPS performance shows that in the past 12 quarters, the company has topped estimates nine times (60%) and missed six times (40%).
Revenue: DocuSign reported revenue of $580.8 million for the fiscal Q4 ending January 31, 2022, up 35% year over year and exceeding management's projection of $557 to $563 million. The consensus estimate on Wall Street was $561 million. In addition, billings increased by 25% to $670.1 million, above the company's projected range of between $647 million and $649 million. For the full year, the company reported revenue of $2.1 billion, an increase of 45%, while billings increased by 27% to 2.4 billion. As a result, DocuSign expects revenue of between $579 million and $583 million for the current quarter short of Street estimates of $594 million.
Stock movement: DOCU shares have lost 58.1% since the company released its last earnings release. Interestingly, following the earnings release, the company's shares have been DOWN 8 times in the past 15 quarters. So, the historical price reaction suggests a 53% probability of the share price going DOWN following the earnings release. According to the Stockearning algorithm, the predicted volatility on the first day is +/-11%, while the predicted volatility on the seventh day is +/-12%.
What analysts are saying: Baird analyst William Power slashed his price target on DOCU from $175 to $140 and maintained a Buy rating in the shares. The analyst forecasted solid Q4 results, with all attention on the forecast and the degree of the revenue downturn and enhancements in sales team productivity. Power stated that he is optimistic about the company's long-term prospects.
City analyst Tyler Radke lowered his price target on the stock from $231 to $137 but kept a Buy rating in the shares. Radke told investors in a research note that investor attention has gotten more acute towards any signals of shrinking growth and weaker profitability tales due to the valuation constraint and rising unpredictability in the system software industry. As a result, DocuSign's Q4 profits are expected to be "more muted," according to the analyst.
Piper Sandler analyst Rob Owens slashed his price target on the stock from $200 to $175 and maintained a Hold rating on the shares. Owens told investors in a research note that most of the demand drivers that boosted cybersecurity investment in 2021 are still in play in 2022. The "perfect storm" for growing cybersecurity requirements will persist, according to the analyst, with a "pretty bullish" IT investment picture and security prioritizing expected to continue in 2022.
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