DOCU Stock: DocuSign Plunges 20% Post Fiscal Q4 Results
14 March 2022 - 8:35PM
Finscreener.org
Shares of
DocuSign (NASDAQ: DOCU)
slumped by 20% on Friday after the company announced its fiscal Q4
of 2022 results that ended in January. DocuSign reported revenue of
$580.8 million in Q4 which was higher than consensus estimates of
$561.47 million. Its adjusted earnings per share stood at $0.48
which was higher than estimates of $0.47 in Q4.
However, the stock fell off a
cliff on Friday as its guidance for Q1 and fiscal 2023 left
investors unimpressed. In Q1, DocuSign forecast sales between $579
million and $583 million, lower than analyst estimates of $594.42
million. Further, it expects sales in fiscal 2023 to range between
$2.47 billion and $2.48 billion,
compared to consensus
estimates of $2.61
billion.
How did DocuSign perform in Q4 of fiscal
2022?
DocuSign increased sales by 45%
while billings were up 37% year over year in fiscal 2022. This
allowed the company to generate record operating and cash flow
margins in the last 12 months.
Similar to other tech stocks that
gained momentum during the onset of COVID-19, DocuSign saw a
deceleration in top-line growth in fiscal 2022. As economic
restrictions were relaxed, the demand for products and services
provided by DocuSign was slower than expected.
For example, the company saw its
revenue rise by almost 50% year over year in fiscal 2021. While
sales grew by 44% in fiscal 2022, it was up by “just” 34.9% in Q4
of fiscal 2022. DocuSign CEO, Dan Springer stated, “While the year
unfolded differently than expected, we are proud of the ongoing
performance and resilience of our team as we scaled to become a
multi-billion dollar company.”
DocuSign added 180,000 customers
in fiscal 2022 and ended the year with a customer base of 1.17
million. International sales were up 55% year over year in Q4 as
the company added 60,000 new customers, which was an increase of
31% year over year. DocuSign’s net dollar retention rate stood at
119% which suggests existing customers increased spending by 19% in
the last 12-months.
DocuSign reported a subscription
gross margin of 85% while operating profit in the quarter stood at
$104 million. Its adjusted operating profit more than doubled to
$419 million in fiscal 2022, as operating margin improved to 20%,
compared to 12% in the year-ago period.
Comparatively, net income was up
125% at $411 million allowing DocuSign to end fiscal 2022 with
almost $900 million in cash. Further, its operating cash flow rose
by 41% to $88 million while free cash flow stood at $70 million,
compared to $44 million in the year-ago quarter. In fiscal 2022,
its operating cash flow rose by 71% to $506 million while free cash
flow grew by 107% to $445 million.
What next for DOCU stock investors?
DocuSign remains optimistic about
the demand for eSignature and broader Agreement Cloud contracts to
gain prominence as the shift towards remote work is inevitable. At
$2 billion in annual revenue, DocuSign is well poised to benefit
from a first-mover advantage. Its revenue should expand at a
healthy pace given the total addressable market stands at $50
billion as enterprises will continue to increase spending on
digital transformation processes.
Its strong brand and leading
market share in addition to product differentiation suggest the
company is uniquely positioned to lead and capture the market
opportunity in the eSignature space.
DOCU stock is currently trading
76% below its record highs, valuing the company at a market cap of
$14.8 billion. Analysts expect DocuSign sales to rise by 19.5% to $2.52 billion in fiscal 2023
and by 14.7% to $2.9 billion in fiscal 2024. Comparatively, its
adjusted earnings per share are forecast to rise at an annual rate
of 45% in the next five years.
DOCU stock is valued at a forward
price to 2023 sales multiple of 5.9x and a price to earnings ratio
of 36.4x which is quite reasonable given its growth estimates.
Analysts tracking DOCU stock expect shares to gain by 50% in the
next 12-months.
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