DOCU Stock Alert: Why Is DocuSign Plunging 40% Today?

DocuSign (NASDAQ:DOCU) stock has plunged more than 40% on Friday after the electronic signature company reported third-quarter results. Importantly, concerns over weak guidance for Q4 are weighing down shares.

Docusign (DOCU) logo on a phone screen with stock charts in background

Source: David Tran Photo / Shutterstock.com

So what exactly do you need to know?

The company said that its fourth-quarter revenue would come in between $557 million and $563 million. Unfortunately for DOCU shareholders, that is below what analysts expected. Those analysts were expecting revenue of $573.8 million.

This morning it seems that even better-than-expected results for Q3 can’t shake guidance fears.

What Happened With DOCU Stock

San Francisco-based DocuSign reported earnings per share of 58 cents. That was much better than the 46 cents analysts were looking for. Its revenue of $545.5 million also far surpassed the $531 million analysts wanted, and represented revenue growth of more than 40%. As experts have been quick to highlight, continued remote work has been good for the company.

Now though, investors are worried this big growth is about to stop. That comes as DocuSign estimates growth of just 30% for the fourth quarter. CEO Dan Spring said on the earnings call:

“While we had expected an eventual step down from the peak levels of growth achieved during the height of the pandemic, the environment shifted more quickly than we anticipated.”

DocuSign also announced the departure of key executive Michael Sheridan, who was the company’s president of international. Sheridan left DocuSign on Nov. 30.

Why It Matters

Today’s plunge is a major come down for DocuSign, which had been one of the best-performing stocks during the pandemic. In fact, DOCU stock tripled in 2020.

The slowing growth at DocuSign also brings into focus the future performance of other stay-at-home stocks. Stocks such as video conferencing company Zoom (NASDAQ:ZM) and at-home fitness specialist Peloton (NASDAQ:PTON) have each fallen more than 30% in the past month.

What’s Next for DocuSign

It’s going to be a painful day for shareholders of DOCU stock. However, it is important to remember that DocuSign just reported a very strong third quarter and that its growth is forecast to continue, just not at the same rate as over the past year.

Going forward, there looks to be continued demand for the electronic signature and contract management services provided by DocuSign. In time, the stock should be able to recover. But the immediate reaction to the company’s weaker-than-expected forward guidance is clearly negative.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


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