DocuSign Inc. was once a key face of the at-home economy, benefiting from surging demand for its electronic-signature tools amid the pandemic, a trend that helped send its stock surging.
But DocuSign shares DOCU, -3.04% have fallen back to earth, having largely erased all of their pandemic-era gains heading into the company’s Thursday afternoon earnings report.
The stock had skyrocketed 351% from its post-pandemic closing low in March 2020 ($68.68) to its Sept. 3, 2021 record close of $310.05. Since then, it has plunged 72% through Thursday, and were set to decline to pre-pandemic levels in Friday’s session. In comparison, the S&P 500 index SPX, -2.38% has lost 11% since Sept. 3, 2021.
DocuSign shares were down more than 25% in premarket trading Friday, and on track to open at levels not seen since November 2019.
See more: DocuSign shares plunge on earnings miss
The latest slide comes after the company cut its billings forecast for the full year. DocuSign (DOCU) called out attempts to improve its execution and acknowledged that it may have been too optimistic about the extent to which pandemic-era trends would continue.
“We doubled the size of the company in sort of like six to seven quarters,” Chief Executive Dan Springer said on the earnings call, according to a FactSet transcript. “It wasn’t that we were not aware of the dramatic economics of it. I think we just didn’t understand what portion of that would be things like one-time use cases or an acceleration where people bought in a more fulsome way so that the removal of that very, very strong tailwind effectively felt like a headwind.”
The company earned at least two analyst downgrades in the wake of the report.
“Not huge fans of the post-[earnings] downgrade and while DOCU shares are probably close to a bottom at current levels if one is taking a longer-term view, we believe the combination of tough compares and continued execution challenges / turnover in the field means any meaningful rebound in billings growth is still further out than we hoped (i.e. no dead cat bounce off easier 2H comps),” wrote Evercore ISI analyst Kirk Materne, who lowered his rating on the stock to in-line from outperform and cut his price target to $75 from $100.
William Blair’s Jake Roberge also moved to the sidelines.
“Given management’s limited visibility, a sales restructuring that will take several quarters to complete, and a lack of near-term catalysts, we believe DocuSign’s stock will remain rangebound over the next few quarters,” he wrote, while shifting his rating to market perform from outperform.
For Wedbush analyst Dan Ives, the report helped validate an existing bearish call on the stock.
“As management continues to figure out how to handle the rising complications and headwinds to improve sales execution in this backdrop, we believe that the end of DOCU’s core growth story is now essentially over with the clock striking midnight following a billings guidance drop of ~$200 million pointing to an uncertain future for the remainder of FY23,” he wrote in a note to clients.
Ives rates DocuSign’s stock at underperform and reduced his target price to $50 from $60.