DocuSign, Inc. (NASDAQ:DOCU) last week reported its latest first-quarter results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Sales of US$297m came in 5.8% ahead of expectations, although statutory earnings didn't fare nearly so well, recording a loss of US$0.26, a 14% miss. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the latest results, DocuSign's 13 analysts are now forecasting revenues of US$1.32b in 2021. This would be a sizeable 25% improvement in sales compared to the last 12 months. Losses are expected to be contained, narrowing 14% from last year to US$1.01. Before this earnings announcement, the analysts had been modelling revenues of US$1.26b and losses of US$0.91 per share in 2021. So it's pretty clear the analysts have mixed opinions on DocuSign even after this update; although they upped their revenue numbers, it came at the cost of a per-share losses.
It will come as a surprise to learn that the consensus price target rose 41% to US$149, with the analysts clearly more interested in growing revenue, even as losses intensify. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic DocuSign analyst has a price target of US$170 per share, while the most pessimistic values it at US$100.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that DocuSign's revenue growth is expected to slow, with forecast 25% increase next year well below the historical 39% growth over the last year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 12% next year. Even after the forecast slowdown in growth, it seems obvious that DocuSign is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for DocuSign going out to 2023, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 3 warning signs for DocuSign that you need to be mindful of.
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