On Friday, Jefferies maintained a positive outlook on DocuSign Inc . (NASDAQ: NASDAQ:DOCU), raising the price target on the company's shares to $115 from the previous $95 while sustaining a Buy rating. The firm's analyst cited a "clean beat and raise" in the company's performance, with both the top line and billings growth accelerating to 8% and 9%, respectively.
This uptick was attributed to early renewals, improved net retention rates, and stronger digital revenue. According to InvestingPro data, DocuSign has demonstrated impressive momentum with a 76.7% return over the past year, while maintaining robust gross profit margins of 80.2%.
The analyst noted that DocuSign's management has revised its fiscal year 2025 (F25) top-line guidance upwards by $15 million, surpassing the $9.8 million beat. This revision comes after the stock has already seen a significant surge of over 60% since the second fiscal quarter. Despite this rise, the analyst believes that DocuSign's stock is trading at an attractive valuation, specifically at 20 times the estimated 2025 free cash flow (FCF), which represents a 20% discount compared to its peers, who trade at approximately 25 times FCF.
InvestingPro analysis indicates the stock is currently trading near its 52-week high of $86.75, with multiple positive indicators including strong cash flows and healthy debt management. Subscribers can access 14 additional ProTips and comprehensive valuation metrics.
DocuSign's recent performance reflects a stabilization in its core business operations, with an emphasis on improved net revenue retention and an acceleration in digital revenue. The company is also experiencing positive momentum in its Identity and Access Management (IAM) solutions, which has contributed to its robust growth.
With a solid return on assets of 28.1% and expectations for continued net income growth this year, DocuSign's financial health score is rated as "GREAT" by InvestingPro's comprehensive analysis framework.
The updated price target of $115 reflects confidence in the company's strategic initiatives and its ability to maintain a trajectory of growth. The analyst's commentary underscores the potential for DocuSign to continue its upward trend in the market, especially considering its current valuation compared to industry counterparts.
In summary, the revised price target from Jefferies is a testament to DocuSign's solid financial results and promising business dynamics. The company's management team is recognized for its successful efforts to raise financial expectations and deliver shareholder value amidst a competitive landscape.
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