DocuSign: Can AI Move the Needle in Fiscal 2025?

Key Points

• DocuSign is a pioneer in implementing electronic signatures for agreements and contracts.
• DocuSign has parlayed its signature business into contract lifecycle management, document generation, identity management, analytics and reporting businesses optimized with AI integration.
• DocuSign acquired Lexion to bolster its AI product portfolio.

DocuSign Inc. NASDAQ: DOCU provides electronic signature and contract lifecycle management (LCM) services. Shares hit highs of $314.70 in 2021 as business surged from the pandemic as businesses and individuals adopted remote meetings and contract signings. Shares have since collapsed as workers returned to the office and COVID was in the rearview mirror. DocuSign announced the acquisition of Lexion, an artificial intelligence (AI) powered intelligent document management platform, for $165 million in cash.

DocuSign is in the computer and technology sector and competes with other electronic signature providers such as Adobe Inc. NASDAQ: ADBE, Oracle Co. NYSE: ORCL and Dropbox Inc. NASDAQ: DBX.

DocuSign's Artificial Intelligence (AI) Implementation

DocuSign has been implementing AI features into its software. Smart document recognition (SDR) enables the platform to extract key data from documents to help streamline workflows automatically. AI also enables automated form pre-filling, helping minimize errors. DocuSign may implement more features that help personalize the user experience based on previously identified preferences and behavior. The acquisition of Lexion is expected to bolster its AI offerings and intelligent document management (IDM) capabilities.

Expanding Beyond E-Signatures: DocuSign's New Features

DocuSign has parlayed its e-signature business into contract lifecycle management (CLM), enabling users to prepare, manage, track and save agreements and contacts electronically. This improves workflows and keeps things organized and accessible. Identity verification is integrated into the platform to ensure the authenticity of signers and prevent fraud, which adds an extra value-added layer of security and trust. Payment processing tools have been integrated into the platform and document generation with customizable templates, analytics and reporting capabilities so users can identify trends, track completion rates, and gain useful insights into agreement processes.

DOCU Stock Has Been Held in a Daily Rectangle Channel Pattern

The daily candlestick chart on DOCU has been in a rectangle channel since mid-April 2024. The rectangle range is comprised of the $61.14 upper trendline resistance and the $54.74 lower trendline support. The upcoming fiscal Q1 2024 earnings report may be the catalyst to break it out of the rectangle. The daily relative strength index (RSI) has been falling to the 37-band. Pullback support levels are at $52.90, $49.12, $46.66 and $44.34.  

A Solid Fiscal Q4 2024 Earnings Report for DocuSign

On March 7, 2024, DocuSign reported fiscal Q4 2024 EPS of 76 cents, beating consensus analyst estimates by 11 cents. Revenues grew 8% YoY to $712.39 million, beating $698.32 million consensus estimates. Billings rose 13% YoY to $833.1 million. Non-GAAP margin rose 100 bps to 25%, hitting the high end of estimates. Restructuring led to another round of layoffs preceding the report. Revenues cooled compared to a 9% YoY growth in Q3, 11% YoY in Q2, and 12% in Q1 2024. Customer usage rose, and key verticals, including insurance, technology, financial services and healthcare, saw a boost.

DocuSign's Raised Guidance

DocuSign raised forecasts, which give the impression that the company is starting a recovery. For fiscal Q1 2024, DocuSign sees revenues in the $704 million to $708 million range versus $700.54 million consensus estimates. Billings are expected between $685 million and $695 million. Non-GAAP operating margins are expected between 27% and 28%.

Fiscal full-year 2025 revenues are expected to be between $2.915 billion to $2.927 billion versus $2.91 billion consensus estimates. Full year billings are expected between $2.970 billion to $2.90 billion. Non-GAAP operating margins are expected between 26.5% to 28%.

DocuSign CEO Allen Thygesen commented, “The opportunity in front of DocuSign remains massive. Today's world runs on agreements, but agreement processes haven't changed in the last 100 years. Even with the evolution to digital documents, agreements and how we use their insights remain relics of antiquated paper-based systems. Sign a document stored as a flat file preserved but disconnected from the systems that run your operations.”

Thygesen summarized: “Our sole focus is transforming those systems for our 1.5 million existing customers to make agreements more valuable for enterprises and SMBs alike.”

Revenue Expectations for DocuSign in Fiscal Q1 2025

The consensus analyst estimate for fiscal Q1 2025 is EPS of 79 cents, up from 72 cents. Consensus revenue expectations are for $707.33 million. DocuSign reports its fiscal Q1 2025 earnings on June 6, 2024, after the market close. The results will determine if DOCU stock can break out or break down from the rectangle channel pattern.

DocuSign analyst ratings and price targets are on MarketBeat.