Insights

Why DocuSign Stock Popped (Again) on Wednesday

What happened

Shares of DocuSign (NASDAQ: DOCU) were climbing again on Wednesday, adding as much as 6.4%. As of 2:59 p.m. ET, the stock was up 5.5%.

In the wake of an announcement yesterday that CEO Dan Springer would relinquish his role, a Wall Street analyst concluded that DocuSign remains in a strong position despite the leadership shuffle. 

So what

Springer “agreed to step aside” as CEO yesterday, with the role of interim CEO filled by Board Chair Mary Agnes Wilderotter “effective immediately.” The company also announced that it had retained a “leading national executive search firm to assist with succession planning and the CEO search.”

JMP Securities analyst Patrick Walravens commented on the situation in a missive to clients, saying that in his view, “given the strength of DocuSign’s market position and the depth of Springer’s experience, he would have navigated through this transition successfully in time.” Walravens also acknowledged the frustration of both investors and the board of directors at DocuSign’s slowing growth. As such, the analyst maintained his $151 price target and outperform (buy) rating on the stock. This would represent gains of roughly 154% for investors compared to Tuesday’s closing price.

Now what

Earlier this month, DocuSign reported uninspiring financial results for its fiscal 2023 first quarter. Revenue grew 25% year over year, while adjusted earnings per share (EPS) of $0.38 dipped from $0.44 in the prior-year quarter. Perhaps even more concerning were the company’s billings, which grew just 16% year over year. Billings, which represent contractually obligated sales the company has yet to recognize as revenue, are a key indicator of future sales growth, so the sharp decline did little to assuage fears of its decelerating growth. 

The rebound in the stock price in recent days suggests that investors are confident that DocuSign can turn things around under new leadership and resume its upward trajectory as the leading provider of digital signatures and the Agreement Cloud, its contract lifecycle management (CLM) platform.

Danny Vena has positions in DocuSign. The Motley Fool has positions in and recommends DocuSign. The Motley Fool recommends the following options: long January 2024 $60 calls on DocuSign. The Motley Fool has a disclosure policy.

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