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Why DocuSign Stock Popped This Morning

By Evan Niu, CFA – Sep 2, 2020 at 3:05PM

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Oppenheimer boosted its price target on DocuSign shares ahead of earnings tomorrow.

What happened

Shares of DocuSign (DOCU 5.57%) popped as much as 8% this morning after getting a bullish upgrade from Wall Street. Oppenheimer reiterated an outperform rating and boosted its price target from $200 to $300. The stock has since given up all of those gains and is down by 3% as of 2:20 p.m. EDT.

So what

Analyst Koji Ikeda is optimistic that DocuSign will be able to report better-than-expected results for the second quarter. Even though the stock has already soared 250% so far this year, the analyst believes that the company can continue to generate strong revenue growth in the long term.

Woman using DocuSign software on a laptop

Image source: DocuSign.

The COVID-19 pandemic has catalyzed broad adoption of DocuSign's electronic signature services because businesses and individuals alike still need to enter into agreements and contracts in this era of remote work and social distancing. The company is slated to report tomorrow after the close.

Now what

Oppenheimer uses a proprietary tracker that points to the biggest earnings beat since DocuSign went public in 2018. "While the efficacy of the analysis is unproven, odds are favorable that DOCU could display the largest magnitude beat to consensus since IPO," Ikeda wrote in a research note to investors.

DocuSign's guidance for the second quarter calls for revenue of $316 million to $320 million, with billings of $333 million to $343 million. The consensus estimate is right in the middle of that top-line range, forecasting $318.6 million in sales. Wall Street is currently modeling for adjusted earnings per share of $0.08.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends DocuSign. The Motley Fool has a disclosure policy.

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