On Tuesday, Jefferies, a global investment banking firm, increased its price target for Docusign Inc. (NASDAQ: DOCU) shares to $95 from the previous $80 while retaining a Buy rating on the stock. The adjustment follows a remarkable performance, with the stock delivering a 74.5% return over the past year and a 35% gain year-to-date. According to InvestingPro analysis, DocuSign (NASDAQ:DOCU) currently appears undervalued based on its Fair Value assessment.
The analyst at Jefferies highlighted that Docusign is perceived as a beneficiary of the recent rate cuts, with an attractive market position. According to the analyst, Docusign is approaching the easiest billing comparison of the year, and the current estimates for 3% growth appear to be on the conservative side.
Jefferies remains optimistic about Docusign's prospects, citing the company's ability to achieve mid-single to high-single digit (MSD to HSD) top-line growth. The firm also expects Docusign to deliver higher profit margins, exceeding 30%, noting that 85% of deals require human interaction. InvestingPro data shows the company already maintains an impressive 80.25% gross profit margin, with a "GREAT" overall financial health score.
The analyst further compared Docusign's valuation to its peers, pointing out that the company is trading at an appealing 17 times its estimated 2025 free cash flow (FCF), which stands in contrast to its peers' average of 26 times FCF. This represents a discount of more than 30%. The revised price target to $95 reflects this positive outlook. For deeper insights into DocuSign's valuation and 16 additional ProTips, check out the comprehensive Pro Research Report available on InvestingPro.
In other recent news, DocuSign has seen a significant boost in its financial performance, as reflected in its Q2 results. The company reported a 7% year-over-year increase in revenue, reaching $736 million. Additionally, its non-GAAP operating margins hit a record 32%, and free cash flow generation was approximately $200 million. The company has also successfully launched the Intelligent Agreement Management (IAM) platform, which has received initial positive feedback.
In the financial forecast, DocuSign anticipates Q3 revenue to be between $743 million and $747 million, and full fiscal year 2025 revenue to be between $2.94 billion and $2.952 billion. Non-GAAP gross margin is expected to be between 81.0% and 82.0% for Q3 and fiscal 2025, with operating margin projected at 28.5% to 29.5% for Q3 and 29.0% to 29.5% for the full year.
BofA Securities has updated its assessment of DocuSign, increasing the price target to $68.00 from the previous $60.00, while maintaining a Neutral rating on the stock. This adjustment follows an evaluation of the company's second-quarter results and future outlook, indicating effective execution of growth and productivity strategies. Despite the positive developments, the firm maintains a neutral valuation of DocuSign's shares.
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