Morgan Stanley upgraded DocuSign Inc (NASDAQ:DOCU) to an Equal-Weight rating (From Underweight) and raised their 12-month price target on shares to $64.00 (From $49.00) following increased investor interest.
Analysts at Morgan Stanley decided to revisit their thesis on DocuSign after a recent Wall Street Journal report, hinting at a potential private equity deal, spurred investor interest in the software company.
For the Bull case, Morgan Stanley believes investors are looking ahead, hoping for better days following tough COVID contract renewals in the next few quarters.
Additionally, investors may be optimistic about a favorable macroeconomic environment, considering stable to declining interest rates. The company's involvement in macro-sensitive sectors such as real estate and financial services, along with advancements in self-service go-to-market investments, adds to this positive outlook.
Bears, however, are focused on recent results as evidence of demand challenges. They highlight slowing growth, a decreasing margin of outperformance, and anticipate low-single digit forward billings growth.
Additionally, there are concerns about the Net Retention Rate dropping below 100%, adding to the bearish sentiment.
“For bears, this difficult competitive environment for DocuSign – as intensifying competition and increased commoditization of core e-signature – contributes to pricing pressure and / or continued market share losses,” wrote analysts in a note.
Shares of DOCU are down 0.91% in mid-day trading on Tuesday.