DocuSign Inc’s comments about a still-tough macro environment, with weakness in enterprise and a deceleration of billings growth in the second half of the year, have soured the opinion of UBS analysts despite the e-signature product provider posting “solid” second-quarter fiscal 2024 financial results.
In a note to clients, they maintained their ‘Sell’ rating on the stock but have raised their 12-month target price on DocuSign shares from $44 to $48.
“DocuSign’s calendar year 2024 free cash flow multiple of 19 times is an 8-point premium to that of Zoom and is in our view still not compelling given the high TAM (total addressable market) penetration, low billings growth profile and increasingly competitive threat from Adobe,” the analysts wrote.
They added that for the second quarter in a row, DocuSign attributed its outperformance to renewal timing, resulting in a projected deceleration to about 3% billings growth in 2H, down from about 10% in 1H.
Analysts at UBS also noted that even though DocuSign still sounds somber about the demand backdrop, it is signaling that the macro environment is stabilizing.
Shares of DocuSign eased 3.3% to $50.41 in late-afternoon trading on Friday and have fallen 11% year to date.
Contact Sean at sean@proactiveinvestors.com