Robinhood shares gain on Q2 beat, as user and crypto growth accelerate
On Friday, Jefferies analyst Brent Thill reiterated a Buy rating for Docusign Inc. (NASDAQ:DOCU) with a price target of $115.00. According to InvestingPro data, DocuSign maintains a "GREAT" overall financial health score of 3.19/5, supporting Thill’s optimistic outlook. The company’s strong fourth-quarter performance included subscription revenue growth of 8.9% year over year, beating the Street’s expectations of 6.8%. Docusign’s total revenue also grew by 9.0% compared to the anticipated 6.8%, and the operating margin reached 28.8%, exceeding the Street’s forecast of 28.0%.
Billings for Docusign surged by 10.8%, driven by factors such as early renewals, Identity and Access Management (IAM) strength, and a shift to more annual billing terms. This performance was notably higher than the Street’s prediction of 5.0%. The company’s impressive gross profit margin of 80.16% and strong revenue growth of 7.52% over the last twelve months demonstrate its operational efficiency. Thill also noted the momentum in IAM, which now accounts for over 20% of direct new customer deals and is expected to significantly increase its share of the total subscription recurring revenue by the fourth quarter of fiscal year 2026.
The company’s net dollar retention rate improved again, reaching 101%, up from 100% in the previous quarter, indicating better gross retention and usage trends. Looking ahead, Docusign provided an upbeat subscription and billings guidance for fiscal year 2026, with expectations of $3,062-3,074 million in subscriptions and $3,300-3,354 million in billings, both figures surpassing the Street’s estimates.
Despite a lower than expected first-quarter top-line guidance and a fiscal year 2026 operating margin guidance that fell short of expectations, Thill remains optimistic about Docusign’s future. The company has not seen any significant macroeconomic impact on its business, and it is preparing to introduce new offerings at its user conference on April 16, including enhancements to IAM and Contract Lifecycle Management (CLM), new AI agents, and additional packaging and pricing options.
Thill concluded that Docusign’s stock is trading at an attractive valuation of 14 times the estimated 2026 enterprise value to free cash flow, which is roughly a 20% discount compared to its peers. InvestingPro analysis suggests the stock is currently undervalued, with additional metrics showing a P/E ratio of 15.3x and strong cash flows that sufficiently cover interest payments. He believes that Docusign’s top-line growth could sustainably be in the high single digits over the medium term due to various growth levers, including IAM traction and international expansion. Additionally, margins could expand to the low- to mid-30s in the coming years as the company executes its efficiency plans. For deeper insights into DocuSign’s valuation and growth potential, including 15+ additional ProTips and comprehensive financial analysis, check out the full Pro Research Report available on InvestingPro.
In other recent news, Docusign Inc. reported impressive fourth-quarter results, surpassing guidance with a notable billings growth of $923 million, an 11% increase. This performance exceeded consensus estimates by 5%, driven by early renewals and a shift to annual billing terms. Citi analyst Tyler Radke responded by raising the company’s price target to $115, citing positive trends in subscription revenue and total revenue, while maintaining a Buy rating. JMP Securities also maintained a Market Outperform rating with a $124 price target, emphasizing Docusign’s leading position in the e-signature market and potential growth in agreement automation.
Wolfe Research kept its Peerperform rating, acknowledging the strong quarter but expressing caution about fiscal year 2026 guidance, which it felt might lack conservatism. Meanwhile, Needham maintained a Hold rating, recognizing the potential growth from Docusign’s Identity and Access Management (IAM) product but awaiting further evidence of sustained adoption. BofA Securities adjusted its price target to $98, maintaining a Neutral rating, reflecting cautious optimism about Docusign’s growth initiatives and sector-wide valuation adjustments.
Overall, analysts highlighted Docusign’s strong performance and growth prospects, particularly in its IAM segment, which is expected to expand significantly by the end of fiscal year 2026. Despite varying ratings and price targets, the consensus remains that Docusign’s strategic initiatives and market position offer promising opportunities for future growth.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.