On Friday, Citi maintained its Buy rating on Docusign Inc. (NASDAQ: DOCU) and raised the price target to $113 from the previous $87. The adjustment follows the company's impressive third-quarter performance, which exceeded expectations in several key areas.
According to InvestingPro data, DocuSign (NASDAQ:DOCU) has demonstrated remarkable market performance with a 76.69% return over the past year, trading near its 52-week high of $86.75.
Docusign reported a significant beat for the third quarter, outperforming on billings and showcasing a resurgence in subscription and total revenue growth. A notable factor in the quarter's success was early renewals, contributing to robust customer addition metrics, with 300,000 new customers.
The company's Net Retention Rate (NRR) also saw an increase to 100%, indicating strong customer satisfaction and retention. InvestingPro analysis reveals impressive gross profit margins of 80.25% and steady revenue growth of 7.7% year-over-year.
The firm highlighted several positive growth indicators for Docusign, including a healthy 11% year-over-year growth in customer numbers, increased usage of the company's envelope product, and a 14% year-over-year increase in international business.
These trends, coupled with the potential for further Identity and Access Management (IAM) enablement, suggest potential upside for the fourth quarter.
Citi analysts also praised Docusign's financial discipline, noting better-than-expected gross margins (GM) and operating margins (OpM). Looking ahead, the firm anticipates continued improvement in these metrics into fiscal years 2026 and 2027. The raised price target reflects a model update that places estimates above the high end of Docusign's guidance and includes an updated regression analysis.
In summary, Citi's confidence in Docusign is bolstered by the company's strong quarterly results, disciplined expense management, and promising growth signals. The potential for further international expansion and IAM offerings in fiscal year 2026, as well as a cyclical recovery in consumption, support the analyst's positive outlook and the increased price target for Docusign shares.
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