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DocuSign's (DOCU) stock sank 42% on Friday to close at $135.09, its biggest drop ever, amid concerns of slowing demand for e-signatures as businesses return to the office. The stock went into a tailspin after DocuSign reported third quarter earnings and profit which beat Wall Street estimates, but billings and revenue guidance which missed expectations.
“The market dynamics that we saw in the third quarter were markedly different from what we experienced in the first half of this year,” CEO Dan Springer said during the company’s earnings call on Thursday evening.
“As we move through Q3 and into the second half of the year, we saw demand slow and the urgency of customers buying patterns temper. What we had expected an eventual step down from the peak levels of growth achieved during the height of the pandemic, the environment shifted more quickly than we anticipated,” added Springer.
The company's fourth quarter revenue projection of $557 million to $563 million came in below Wall Street expectations.
Billings for the year ending January 31 are now forecast at $2.34 billion. That metric came short of the company previous guidance.
DocuSign’s third quarter top and bottom lines beat Wall Street consensus estimates, with adjusted earnings per share of 58 cents and revenue of $545.5 million respectively.
The company had experienced unprecedented growth during the worst of pandemic as businesses shifted to work from home and electronic signatures skyrocketed.
“Even as the pandemic subsides, and people begin to return to the office, they are not returning to paper,” assured Springer during the earnings call.
The e-signature company noted an addition of 59,000 new customers in the third quarter. One of those was UPS (UPS), which is modernizing its contracting process using DocuSign, according to Springer.
Several Wall Street analyst cut their rating on the stock. Wedbush Securities’ Dan Ives categorized the period as a "debacle quarter" and cut his recommendation to Neutral from Outperform.
JPMorgan and Needham analysts also downgraded the stock to Underweight and Hold respectively.