Doximity (DOCS) Shares Plunge 1.06% to 2025 Low on Revised Guidance, Valuation Concerns

Doximity (DOCS) shares fell 1.06% on Thursday, marking the lowest level since September 2025 amid a 1.11% intraday decline. The selloff follows persistent pressure from a combination of revised guidance, bearish analyst sentiment, and valuation concerns that have weighed on investor confidence in recent months.

The stock’s recent weakness stems from a 28% drop in early August 2024 after the company slashed its full-year revenue forecast, citing weaker growth than anticipated. Despite reporting 20% year-over-year revenue and 50% free cash flow growth in Q1 2024, the revised 10% sales growth projection for 2026 failed to meet investor expectations, triggering a 14% sell-off in September. Analysts highlighted that the market had priced in "near-perfect" growth assumptions, which the updated guidance could not justify.

Institutional activity has reflected mixed signals. While Harbor Capital Advisors increased holdings on September 19, other investors like ArrowMark Colorado Holdings added smaller positions in mid-September. Conversely, Russell Investments had reduced its stake in August, underscoring cautious sentiment. Analysts at Morgan Stanley maintained a "Sell" rating, citing concerns over valuation and growth sustainability, while others like Robert W. Baird expressed optimism about long-term AI-driven opportunities.

Doximity’s premium valuation has remained a focal point. With a forward P/E ratio of 48.38 and a PEG ratio of 3.52 as of late August—well above industry averages—investors questioned whether the stock’s price aligned with its fundamentals. Zacks Investment Research noted the valuation appeared "loftier than its fundamentals," contributing to the recent volatility. However, the company’s AI-powered tools, including Doximity GPT, showed strong momentum, with sales growing fivefold year-over-year, signaling potential for long-term differentiation.

Despite near-term challenges, the company’s strategic strengths remain intact. Its platform dominates the U.S. medical community, with 80% of physicians using its services, and its "land-and-expand" model continues to drive growth from high-value clients. Piper Sandler analysts described the infrastructure as "best-in-class," though they acknowledged risks from overvaluation and macroeconomic headwinds. For now, the market’s focus remains on whether the company can reconcile its guidance with investor expectations while capitalizing on its AI-driven innovation.