Docusign plummets 26% after Q1 earnings bomb: “Docusign’s growth story continues to fade”

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Docusign shares plunged 26% on Friday after the company reported mixed first-quarter results that suggested the company’s fast-growing work-from-home days are continuing to unravel.

Additionally, the e-signature software maker lowered its fiscal 2023 billing forecast by $185 million, again putting the company in the penalty box with investors, according to the analyst. Wedbush, Dan Ives.

Here are the key numbers:

Revenue: $588.7 million, vs $581.9 million expected by analystsAdjusted earnings per share: $0.38, versus analysts’ expectations of $0.46Second quarter outlook: Total revenue of $600 million to $604 million, versus $604.6 million expected by analysts.

While Docusign continues to disappoint investors, with its stock trading near 52-week lows, it saw its free cash flow increase year over year to $175 million, and the company had more than a billion in cash at the end of the quarter.

But that’s not enough given previous years of Docusign’s rapid growth amid COVID-19 pandemic lockdowns, according to Ives. In a note on Friday, he said Docusign’s earnings results represented “a debacle billing guide that portends darker growth days ahead.”

“The company again lowered its billing guidance, which continues to eclipse the company’s above-average revenue this quarter. The ripple effect of COVID on sales over the previous two years and the slowdown in their expected expansion,” Ives added.

Meanwhile, Docusign’s international sales growth has been hit by macroeconomic constraints such as rising interest rates, as well as Russia’s war on Ukraine, according to the memo.

“As management continues to figure out how to manage growing complications and headwinds to improve sales execution in this environment, we believe the end of Docusign’s core growth story is now virtually complete with the clock striking midnight following a decline in billing guidance of approximately $200 million pointing to an uncertain future for the remainder of FY23,” Ives said.

It maintained its “Outperform” rating on Docusign and lowered its price target to $50 from $60, reflecting continued uncertainty and lower expectations.

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