Why DocuSign Stock Is Down By 22% Today

Key Insights

• DocuSign beats analyst estimates on revenue and meets them on earnings. 
• The company’s guidance highlights slowing growth. 
• DocuSign remains a rather expensive stock despite the strong pullback.

DocuSign Stock Drops As Traders Focus On Slowing Growth

Shares of the e-signature company DocuSign gained strong downside momentum after the company released its fourth-quarter report.

DocuSign reported total revenue of $580.8 million and adjusted earnings of $0.48 per share, beating analyst estimates on revenue and meeting them on earnings.

On a GAAP basis, the company reported a loss of $0.15 per share. The company noted that its subscription revenue increased by 37% on a year-over-year basis and totaled $564 million.

In the first quarter, the company expects to report total revenue of $579 million – $583 million and subscription revenue of $562 million – $566 million.

The market focused on the company’s disappointing guidance which highlighted slowing growth, and the stock moved below the $75 level.

What’s Next For DocuSign Stock?

Analysts expect that DocuSign will report earnings of $2.15 per share in the current fiscal year, so the stock is trading at 34 forward P/E.

The company’s valuation has dramatically decreased in recent months as DocuSign stock declined from the highs near $315 that were reached back in September 2021 to the $73 level. However, the company is still not cheap at current levels.

The market is worried that the major boost from the shift to work-from-home is over, and DocuSign’s growth will slow down materially. In addition, the market is sensitive to growth rates of high-PE stocks in the current environment, so it’s not surprising to see that DocuSign stock is down by more than 20% after the disappointing report.

It remains to be seen whether traders will rush to buy DocuSign shares in the upcoming trading sessions as the trading action in recent months indicated that similar stocks remained under pressure for weeks after disappointing reports.

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