Company Reports

We are raising our fair value estimate for no-moat Docusign to $70, from $65, after the company reported good second-quarter results, with both revenue and non-GAAP operating margin topping our expectations as well as the high end of guidance. The company has been delivering strong quarterly results over the last year or two. Early indications on the recently launched Intelligent Agreement Management, or IAM, platform are that deal sizes are larger, win rates are better, and deals are closing faster, and August bookings were larger than June and July combined. So all signals are pointing in the right direction. The primary negative element from results is that billings guidance is the disconnect within guidance that has billings growing at half the rate revenue is for the full year. We see solid results, stabilization trends, slightly raised guidance for the year, several green shoots, and $200 million in share buybacks for the quarter as evidence that the company is on a better trajectory even if we currently prefer some of our wide-moat stocks.

Docusign is the leader in electronic signatures and contract lifecycle management software and is well positioned to capitalize on the evolving industry, in our view. We see existing customers adopting more use cases and expanding seats over time, as well as moving to the Agreement Cloud platform.

No-moat Docusign reported solid fiscal 2025 first-quarter results, with revenue and non-GAAP operating margin very slightly exceeding our expectations and coming in a bit above the top end of the guidance ranges. The company has been delivering more upside to guidance over the last year or more, so we think the after-market selloff is indicative of a miss against a more aggressive whisper number. During the quarter, Docusign also launched its new Intelligent Agreement Management platform. We think this is an important step in the company’s evolution but do not believe IAM will have a meaningful impact on results for a couple of years. We are maintaining our $65 fair value estimate. We see solid results, slightly raised guidance for the year, several green shoots, and a new $1 billion share-buyback authorization and think the shares are increasingly attractive even if we prefer some of our wide-moat stocks at this juncture.

Docusign is the leader in electronic signatures and contract lifecycle management software and is well positioned to capitalize on the evolving industry, in our view. We see existing customers adopting more use cases and expanding seats over time, as well as moving to the Agreement Cloud platform.

As the leader in electronic signatures and contract life cycle management software, we think DocuSign is well-positioned to capitalize on the evolving industry. We also see existing customers adopting more use cases and expanding seats over time, and also moving to the Agreement Cloud platform.

After reconsidering DocuSign's rollercoaster performance during the lockdowns and in the postcovid hangover period, we are lowering our moat rating to none from narrow. We see the company’s business as moaty in general as a result of the proof point from covid and a high degree of recurring revenue, with the underlying moat source being switching costs. However, we are concerned that the company derives nearly all of its revenue from e-signatures and has been unable to gain more meaningful traction with some of its newer solutions, such as contract lifecycle management, thus far. We also see Adobe, the company’s main competitor, as making inroads with pricing and packaging, as well as usage drivers for both Acrobat and Adobe Sign, which could have an impact on DocuSign’s leadership position.

As the leader in electronic signatures and contract life cycle management software, we think DocuSign is well-positioned to capitalize on the evolving industry. We also see existing customers adopting more use cases and expanding seats over time, and also moving to the Agreement Cloud platform.

As the leader in electronic signatures and contract life cycle management software, we think DocuSign is well-positioned to capitalize on the evolving industry. We also see existing customers adopting more use cases and expanding seats over time, and also moving to the Agreement Cloud platform.

Narrow-moat DocuSign's fourth quarter was strong, with both revenue and non-GAAP operating margin exceeding our expectations. Management’s fiscal 2025 targets were higher than our initial estimates, as the firm expects an uptick in subscriptions thanks to a stabilizing environment, as well as margin expansion from recent restructuring efforts. We are encouraged by DocuSign’s focus on broadening its capabilities beyond its flagship eSignature offering, such as contract lifecycle management, WhatsApp integration, and international expansion, which we expect to be fundamental in driving growth. Given our increased near-term outlook and expectations for a modestly higher margin profile in the medium term, we raise our fair value estimate to $80 per share from $74. While we view shares as currently attractive for long-term investors, we continue to prefer some of our wide-moat names for their more consistent growth profiles.

Today it was widely reported that Bain Capital and Hellman & Friedman are competing to acquire narrow-moat DocuSign in an auction process. A sale underscores our belief that e-signature is a feature best contained in a broader platform. DocuSign’s contract lifecycle management could be that platform but that solution remains a small part of the company’s revenue, and investors may not have the patience to wait for a broader platform to reinvigorate growth, so there is rationale for selling the company.

Narrow-moat DocuSign reported strong fiscal 2024 third-quarter results, with the top line and non-GAAP operating margin exceeding our expectations. Profitability was similarly strong, as disciplined investments are bearing fruit. DocuSign’s operating environment remains difficult as budgets continue to face high scrutiny, with significant headwinds in the financials and real estate verticals. We are encouraged by DocuSign’s focus on broadening platform capabilities through initiatives beyond its flagship eSignature offering, such as contract lifecycle management and a new WhatsApp integration, as well as international expansion efforts. We are maintaining our $74 fair value estimate. The stock appears attractive for long-term investors, but we prefer some of the wide-moat names we cover as macro uncertainty persists.

Narrow-moat DocuSign reported solid second-quarter results, with both top-line and non-GAAP operating margin exceeding our expectations. Operating margin remains strong as a result of recent headcount reductions. Margins are expected to decline throughout the remainder of the year though, as DocuSign continues to innovate and invest in its products such as ID Verification and the expanded availability of DocuSign Monitor. Despite the macroeconomic headwinds, good results and a raised full-year outlook indicate that DocuSign is confident enough in its core business to invest in its products even in a difficult operating environment. DocuSign has executed well by focusing on margins, streamlining its sales approach, and accelerating product innovation. We keep our fair value estimate of $74. We see shares as attractive for patient investors, but continue to prefer some of our wide-moat names as macroeconomic uncertainty persists.

Narrow-moat DocuSign reported a good first quarter, with both top line and non-GAAP operating margin exceeding the high end of guidance. Operating margin benefited from recent headcount reductions, although guidance indicates margins will decline as the year progresses and investments ramp. Management said the environment is largely unchanged, with various pockets of strengths and weaknesses. Despite the macroeconomic headwinds, results and guidance indicate DocuSign has corrected course in terms of focusing on margins, streamlining the sales approach, and accelerating product innovation. Based on results and guidance, we fine-tuned our model and raised our fair value estimate to $74 per share, from $72. We see shares as attractive for patient investors, but continue to prefer some of our wide-moat names as macroeconomic uncertainty persists.

As the leader in electronic signatures and contract life cycle management software, we think DocuSign has a long runway for growth through viral adoption in greenfield opportunities. We also see existing customers adopting more use cases and expanding seats over time, and also moving to the Agreement Cloud platform.

For the third consecutive quarter DocuSign reported good results, with fourth-quarter revenue and non-GAAP operating margin both exceeding the high end of guidance as well as our expectations. First-quarter guidance was constructive, albeit with better profitability compared with our expectations as a result of recent headcount reductions, and slightly lower revenue growth. DocuSign continues to see macroeconomic pressures resulting in deal compression and elongated sales cycles. In fact, management noted a slight deterioration in the demand environment. CFO Cynthia Gaylor is leaving, but will remain on board through next quarter’s earnings announcement. Her departure comes on the heels of a CEO transition just five months ago, which while not alarming, is certainly not a positive development. We tweaked our growth estimates down slightly and moved our profitability up slightly and are therefore maintaining our fair value estimate for narrow-moat DocuSign at $72 per share. With shares selling off in the aftermarket, we see upside to shares, but continue to prefer wide-moat stocks during this period of economic turmoil.

As the leader in electronic signatures and contract life cycle management software, we think DocuSign has a long runway for growth through viral adoption in greenfield opportunities. We also see existing customers adopting more use cases and expanding seats over time, and also moving to the Agreement Cloud platform.

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.

As the leader in electronic signatures and contract life cycle management software, we think DocuSign has a long runway for growth through viral adoption in greenfield opportunities. We also see existing customers adopting more use cases and expanding seats over time, and also moving to the Agreement Cloud platform.

DocuSign reported second-quarter results that exceeded the high end of guidance for revenue and were at the high end for non-GAAP operating margin. More importantly, the company increased its billings growth outlook for the year by about 100 basis points based on improvement in sales execution issues with bolstered leadership. Management maintained revenue and non-GAAP operating margin guidance for the year, is close to naming a new CEO, and repurchased $25 million worth of shares in the quarter. Based on these factors, we see light at the end of the tunnel, although we do not think the company is out of the woods yet. Macro conditions are deteriorating and DocuSign saw some lengthening deal cycles and smaller deals in real estate and financial services. Based on these factors, we are maintaining our fair value estimate of $88 per share, and see upside to shares, but advise investors to proceed with caution given recent missteps.

DocuSign announced Dan Springer is out as CEO of the company. He has been replaced by Chairman of the Board Maggie Wilderotter on an interim basis as the firm begins a search for a permanent CEO. Wilderotter has been on the board since March 2018 and previously served as the CEO of Frontier Communications from 2006 through 2015. While no time frame was provided, we would expect a new CEO to be named within approximately six months. Given her extensive leadership experience, we expect no issues with Wilderotter leading the company during this transitionary period.