Wells Fargo maintains Docusign stock underweight with $73 target

On Friday, Wells Fargo (NYSE:WFC) analyst Michael Turrin reiterated an Underweight rating on Docusign Inc. (NASDAQ: DOCU) with a $73.00 price target. The company, currently valued at $15.09 billion, has maintained impressive gross profit margins of 80.16% and received a "GREAT" financial health score according to InvestingPro analysis. Turrin provided an analysis of Docusign’s initial financial guidance for fiscal year 2026, which includes expectations for total revenue growth of 5-6%, subscription revenue growth around 6%, billings growth of 6-7%, and an operating margin (OM) of 28.3%. These projections compare to previous street estimates of 6.3% for total revenue growth, 6.0% for subscription revenue, 5.8% for billings growth, and a 29.6% operating margin. Trading at a P/E ratio of 15.3, InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report covering 1,400+ top US stocks.

The guidance from Docusign also highlighted several factors impacting their financials. Foreign exchange (FX) rates are expected to create a 70 basis points headwind to Q1 and FY26 revenue growth and a 100 basis points headwind to Q1 and FY26 billings growth. Adjusting for constant currency (CC), the guidance implies growth rates of 7% for revenue, 7% for subscription revenue, and 8% for billings.

Additionally, the company anticipates a 1 percentage point headwind to first-quarter revenues due to the lapping of the leap year, which would adjust the subscription revenue growth rate to approximately 8% on a constant currency basis. Docusign also expects a 1 percentage point impact on FY26 billings due to reduced early renewal volumes and a 1 percentage point gross margin (GM) headwind resulting from data center migration. The GM is expected to stabilize in FY27, but the operating margin will face a 150 basis points headwind due to gross margins, a challenging comparison in the second quarter, and a shift in compensation more towards cash.

Turrin noted that while Docusign’s initial outlook suggests that the business is improving, achieving acceleration in growth is considered a high bar to meet at the start of the year. This is particularly true given the ongoing questions about the incremental functionality and contribution of Identity Access Management (IAM) to the business. InvestingPro subscribers have access to 15+ additional exclusive insights about DocuSign’s financial health, growth prospects, and valuation metrics that could help inform investment decisions.

In other recent news, DocuSign Inc (NASDAQ:DOCU). reported strong fourth-quarter results, exceeding guidance expectations in both revenue and billings. Notably, subscription revenue grew by 8.9% year-over-year, while total revenue saw a 9.0% increase, surpassing anticipated figures. The company’s Identity Access Management (IAM) segment showed promising growth, contributing significantly to new customer deals and projected to expand its share of subscription revenue by fiscal year 2026. Jefferies reiterated a Buy rating with a $115 price target, highlighting the company’s strong performance and future growth potential.

Meanwhile, Piper Sandler maintained a Neutral rating with a $90 target, acknowledging the company’s solid results but expressing caution due to macroeconomic uncertainties. Morgan Stanley (NYSE:MS) also held an Equalweight rating with a $97 target, noting the company’s impressive billings growth and positive IAM developments. BofA Securities adjusted its price target from $112 to $98, maintaining a Neutral rating while citing valuation concerns despite acknowledging strong growth initiatives. Evercore ISI set an In Line rating with a $100 target, emphasizing DocuSign’s solid fiscal year 2025 performance and growth prospects in IAM and platform services.

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