DocuSign Is Rolling; Lower Growth Previewed for 2024 Drives Our Estimates Lower; FVE Cut to $72

For the second consecutive quarter, DocuSign reported strong results, with third-quarter revenue and non-GAAP operating margin both exceeding the high end of guidance as well as our expectations. Fourth-quarter guidance was constructive, especially from a profitability perspective. The company saw continued signs of stress with deal compression and elongated sales cycles, strong early renewals helped with results. A restructuring plan announced in September helped with margins. The call also featured recently appointed CEO, Allan Thygesen, who talked mainly about opportunities to improve sales and operational issues as a first priority. The most important item in our view was management’s preview of next year, which called for high-single-digit revenue growth. We were looking for a bit more, hence we lowered our growth assumptions and therefore lowered our fair value estimate for narrow-moat DocuSign to $72, from $88 previously. While we see upside to the stock, we prefer some of our wide-moat companies during this period of economic turmoil.