DocuSign Inc. (NASDAQ: DOCU) saw its stock surge by more than 15% after the company reported impressive third-quarter results, beating analysts’ expectations, and provided a positive outlook for the remainder of the year.
Q3 Performance Exceeds Expectations
For the third quarter ending on October 31, 2024, DocuSign posted adjusted earnings per share (EPS) of $0.90, surpassing the consensus estimate of $0.87. The company reported revenue of $754.8 million, marking an 8% year-over-year (YoY) increase and exceeding the analyst forecast of $745.26 million.
Growth Driven by Intelligent Agreement Management (IAM)
DocuSign’s strong performance was largely attributed to the momentum of its Intelligent Agreement Management (IAM) platform. CEO Allan Thygesen remarked, “In Q3, early IAM momentum outpaced expectations, and we continued to drive improvement in our core business with strong revenue growth and operating profit.”
The company also highlighted a 9% YoY increase in billings, a notable acceleration from the 2% growth seen in the previous quarter.
Analysts Cite Strong Customer Growth and Early IAM Success
According to analysts from Bank of America, several factors contributed to the company’s outperformance. These include easier year-over-year comparisons, early renewals, new customer growth, and strong net retention. Furthermore, the early success of IAM played a significant role in driving momentum.
Bank of America analysts raised the stock’s price target from $68 to $112, citing these encouraging developments and progress in self-service market efforts and larger customer accounts.
Optimistic Outlook for Q4 and Full Fiscal Year 2025
Looking ahead, DocuSign offered an optimistic forecast for the upcoming quarter and fiscal year. For Q4, the company expects revenue to be between $758 million and $762 million, surpassing the analyst estimate of $756.2 million.
For the full fiscal year 2025, DocuSign anticipates revenue to reach $2.959 billion to $2.963 billion, exceeding the consensus estimate of $2.947 billion.
Strong Cash Flow and Billings Growth
DocuSign also reported impressive billings growth of 9% YoY, totaling $752.3 million. This key metric signals future revenue potential. The company’s cash flow remained robust, with free cash flow of $210.7 million for the quarter.
Analysts Remain Bullish on DOCU
In addition to Bank of America’s upgrade, Jefferies analysts also raised their price target for DocuSign stock, from $95 to $115. Despite the 60% surge in the stock price since the second quarter, Jefferies analysts believe the stock is still attractive, trading at 20 times its projected free cash flow for 2025—a 20% discount compared to its peers, which trade at 25 times.
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