DocuSign shares soar 15% on earnings beat and strong guidance

DocuSign Inc (NASDAQ:DOCU ) saw its shares surge more than 15% after the electronic signature company reported better-than-expected third-quarter results and provided upbeat guidance for the current quarter and full fiscal year.

For the third quarter ended October 31, 2024, DocuSign posted adjusted earnings per share of $0.90, surpassing analyst estimates of $0.87. Revenue came in at $754.8 million, up 8% YoY and above the consensus forecast of $745.26 million.

The company's strong performance was driven by momentum in its Intelligent Agreement Management (IAM) platform. CEO Allan Thygesen noted, "In Q3, early IAM momentum outpaced expectations, and we continued to drive improvement in our core business with strong revenue growth and operating profit."

The firm said billings grew 9% year-over-year, marking a notable acceleration from 2% in the prior quarter. 

According to Bank of America analysts, easier comparisons and early renewals, alongside new customer growth, net retention, and early traction from the IAM contributed to the outperformance. 

"These are encouraging developments, coupled with progress on both the self-service go to market effort and larger accounts," BofA analysts led by Brad Sills said, raising the price target on the stock from $68 to $112. 

Looking ahead, DocuSign provided an optimistic outlook. For the fourth quarter, the company expects revenue between $758 million and $762 million, above analyst projections of $756.2 million.

For the full fiscal year 2025, DocuSign anticipates revenue of $2.959 billion to $2.963 billion, exceeding the consensus estimate of $2.947 billion.

The company's billings, a key metric indicating future revenue, grew 9% YoY to $752.3 million. DocuSign also reported strong cash flow, with free cash flow of $210.7 million for the quarter.

Jefferies analysts also hiked their DOCU target price, from $95 to $115. Despite the 60% surge since the second quarter, the stock "trades attractively," at 20 times its projected free cash flow for 2025—around a 20% discount compared to peers trading at 25 times.

Senad Karaahmetovic contributed to this report. 

Source: Investing.com