DocuSign: Why I See No Reason To Be Bullish Now

  • DocuSign’s 1Q FY2025 earnings results were slightly better than expected, but the top-line growth rate reached a historical low, showing no sign of rebounding.`.
  • The company’s revenue growth has been softening, with a projected deceleration to mid-single digits and flat margins.
  • The billings growth has also slowed to single digits, and management lowered its billings guidance for FY2025, suggesting a potential headwind for cash inflow.
  • Stock-based compensation grew 15% YoY in FY2024, which significantly improved non-GAAP year-over-year results and non-GAAP valuation multiples.
  • Despite a cheaper valuation than a year ago, without a growth rebound, the stock is likely to remain in a value trap.

Investment Thesis

DocuSign (NASDAQ:DOCU)’s stock dipped by more than 3% despite a better-than-expected 1Q FY2025 earnings report. A slightly negative reaction without triggering a significant selloff might indicate a muted result that disappoints investors. In