DocuSign: Disconnect Emerging Between Analyst And Trader Outlooks
Geoff Considine, Ph.D | Dec 13, 2021 08:02AM ET
- DocuSign (DOCU) is a leading provider of e-signature and related solutions
- The shares cratered in mid-November on weaker management guidance for Q4
- The Wall Street consensus outlook is bullish, with 50%+ expected 12-month price appreciation
- The market-implied outlook (calculated from options prices) is bearish through 2022
- With the substantial disagreement between the market and the analysts, I compromise on a neutral rating for DOCU
DocuSign (NASDAQ:DOCU) soared during the pandemic as the demand for e-signature and related document management services expanded dramatically. As businesses returned to some degree of normalcy, investors became more cautious.
Since hitting a YTD high close of $310.05 on Sept. 3, DOCU had declined in the month leading up to reporting Q3 earnings, falling 24.6% to close at $233.82 on Dec. 2. Reporting after trading hours on Dec. 2, the company downgraded the stock and reduced price targets.
Thanks to the massive decline in the share price since Dec. 2, the Wall Street consensus 12-month price target for DOCU is about 50% above the current price. By contrast, the market-implied outlook, representing the consensus view of the options market, is substantially bearish.
The most-probable price return for the period from now until June 2022 is -20%. The most-probable price return to January 2023 is -27%. Especially given DOCU’s high volatility, the range of plausible returns is broad. With the substantial disconnect between the analyst consensus and the market-implied outlook, I am compromising on a neutral rating for DocuSign.
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