DocuSign Stock Plummets 16% After Lowering Full-Year Billings Guidance

DocuSign, a prominent electronic signature solutions provider, has encountered a challenging situation following its decision to lower its full-year billings guidance on Friday. This move has raised concerns among analysts regarding the company's short-term prospects, leading to a significant drop in its stock price, which fell by more than 16% on the same day.

Josh Baer, an analyst, highlighted the disconnect between DocuSign's current performance metrics and the optimistic outlook provided by its management regarding its smart contract management business. Baer noted that while the current situation may be temporary, patient investors could eventually see returns. He maintained a "hold" rating on the stock, lowering the target price. Baer emphasized the need for more evidence to support the market's optimistic expectations for the smart contract management business.

Baer further analyzed that for neutral investors lacking patience, it would be reasonable to remain on the sidelines for the next quarter, as the smart contract management business may not show significant growth until the second half of the 2026 fiscal year. He stated that the firm leans towards a neutral stance, considering the presence of some bearish factors. More evidence is needed to confirm whether the smart contract management business can drive double-digit growth acceleration. Therefore, the "hold" rating is maintained.

Another analyst acknowledged that DocuSign is moving in the right direction but cautioned that the weakness in billings remains a concern for investors. The analyst noted that while the shortfall in billings and the downward revision of guidance have put pressure on the stock price, management remains optimistic about the overall business trend. The management believes that the billing gap is more due to an underestimation of the risk of early renewals in the first quarter rather than a fundamental shift in the business.

The analyst concluded that while the market's reaction today might be somewhat overdone from a long-term perspective, the stock price could continue to fluctuate within a certain range until more confidence is gained in the adjusted outlook. The overall sentiment suggests that while DocuSign faces immediate challenges, its long-term prospects remain promising if it can deliver on its smart contract management business expectations.