Adobe worth $26 billion less as DocuSign fears spark ‘knee-jerk reaction’ for stock
Shares of Adobe Inc. sank to their worst performance in more than 20 months Friday, after DocuSign Inc. delivered what some saw as a the latest sign of a demand cool-down for work-from-home software.
DocuSign DOCU, -42.22% Chief Executive Dan Springer acknowledged Thursday that while his electronic-signature company saw “accelerated growth” for six quarters amid the pandemic, customers have gone back to “more normalized buying patterns.” As a result, DocuSign delivered a downbeat bookings outlook, sending its shares cratering more than 40%.
Some of that investor fear seemed to transfer over to Adobe ADBE, -8.24% , which also offers contract-management software and allows for the collection of e-signatures. Adobe’s stock fell 8.2% Friday, its steepest single-day percentage drop since March 2020 and the worst performance on the day from an S&P 500 SPX, -0.84% stock. The move wiped away $26.3 billion in market capitalization, taking Adobe’s valuation lower than $300 billion.
The decline in Adobe shares struck Wedbush analyst Daniel Ives as a “DOCU-related selloff,” he told MarketWatch, as DocuSign’s report served as a “a barometer that the WFH tailwinds are now abating and could be a headwind for Adobe.”
“The DOCU print was a shocker and this is a knee-jerk reaction,” he said.
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Adobe is due to post its own quarterly results Dec. 16. The company highlighted its e-signature technology in its prior earnings report, as Chief Financial Officer John Murphy noted that “third-quarter Document Cloud growth drivers included adoption of Sign in Acrobat driven by the increased need to collaborate in a hybrid work environment.”
While other at-home stocks took a hit on disappointing outlooks earlier in the course of the pandemic, DocuSign initially appeared more resilient. Its stock hit an all-time high in September and was up 165% since March 2020 as of Thursday’s close. Now the company will need to “show that it can generate, not just fulfill, demand on a regular basis,” according to an Evercore analyst.
FactSet, MarketWatch
Adobe has a more diversified business than DocuSign. While the company sells contract-related software, it has a variety of other offerings including subscriptions to creative programs like Photoshop. Adobe’s Document Cloud accounted for about 13% of the company’s overall revenue in its last-reported quarter.
Shares of Adobe were up 86% since March 2020 as of Thursday’s close.
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Check out the companies making headlines in midday trading.
DocuSign — The software stock plunged 42% after the company issued fourth-quarter sales guidance that was lower than what analysts expected. DocuSign gave a range of $557 million to $563 million, while analysts surveyed by Refinitiv expected $573.8 million.
Asana — Shares of the work management platform tumbled 26% despite beating expectations in its third-quarter results. Asana recorded an adjusted loss of 23 cents per share, which was narrower than the loss of 27 cents per share estimated by analysts, according to StreetAccount.
Ollie’s Bargain Outlet — Shares of the discount retail chain tanked 20% after Ollie’s missed estimates on the top and bottom lines for the third-quarter. Ollie’s said that supply chain issues hurt its results. Guidance for earnings and revenue was also weaker than expected.
DiDi Global — Shares of the Chinese ride-hailing giant fell 22% after company announced plans to delist from the New York Stock Exchange “immediately” amid Beijing’s crackdown on oversea listings. The company said it will pursue a listing in Hong Kong instead. Didi said its U.S. shares will be converted into “freely tradeable shares” on another international exchange.
Marvell Technology — The chipmaker’s shares jumped 17% after reporting quarterly results that beat estimates on the top and bottom lines. Marvell’s adjusted earnings came in at 43 cents per share on revenue of $1.21 billion of revenue, while analysts surveyed by Refinitiv were expecting 39 cents per share on revenue of $1.15 billion.
Nvidia — The chipmaker’s share price fell 4% as its planned $40 billion acquisition of chip designer Arm looks increasingly unlikely to go through. The deal was set to close in March but is facing a growing number of regulatory probes around the world.
Big Lots — The retailer saw its shares rise 5.3% after it reported a narrower-than-expected loss per share for the third quarter, at 14 cents, compared to analysts' expectations of 16 cents. Big Lots also beat revenue expectations, bringing in $1.34 billion, versus estimates of $1.32 billion, according to StreetAccount.
Peloton — Shares of the at-home exercise company slid more than 2%, giving back an earlier gain that had been fueled by Deutsche Bank initiating coverage on the stock with a buy rating. The firm said that while it was a “tough ride in 2021,” ultimately “patience gets rewarded.” From a fundamental standpoint, Deutsche Bank believes Peloton can exhibit earnings power even in a fully reopened economic environment.
Zillow — The digital real estate company’s shares jumped 10% after it said it has sold or is in the process of selling about half of the dwellings it purchased for its home-flipping business, which it announced in early November it would shutter. Zillow also announced Thursday it plans to buy back up to $750 million in stock, about 5.5% of its current market cap, Bloomberg reported.
Tesla — Tesla shares fell more than 6% after CEO Elon Musk sold another $1 billion in Tesla shares, bringing his recent stock sales to $10.9 billion.
— CNBC’s Jesse Pound, Pippa Stevens and Yun Li contributed reporting
DocuSign stock craters to worst day on record after ‘one of the biggest SaaS whiffs in recent memory’
DocuSign Inc. emerged as a hot pandemic stock play last year as it benefited from the need for digital contract tools, but the company lost more than 40% of its valuation Friday after suggesting the pandemic-induced demand boom is waning.
Shares of DocuSign DOCU, -42.22% fell 42.2% Friday, by far their steepest single-day percentage decline on record, wiping away roughly $19.4 billion worth of market capitalization. DocuSign issued earnings Thursday evening with a disappointing billings outlook, and Chief Executive Dan Springer called out a “return to more normalized buying patterns” following a stretch of “accelerated growth.”
The stock nearly tripled in 2020, pushing its market cap higher than $40 billion, but is now down 39.2% this year. In comparison, the S&P 500 index SPX, -0.84% has rallied 21% this year after climbing 16% last year.
The company’s report served as “a good reminder that even outstanding companies take their proverbial eye off the sales ball,” Needham analyst Scott Berg wrote in a note downgrading DocuSign’s stock to hold from buy. While DocuSign announced that it would be changing some elements of its sales organization, Berg said he has found that “fixing these sales issues often requires several quarters.”
Citi Research analyst Tyler Radke wrote that DocuSign delivered “one of the biggest SaaS [software-as-a-service] whiffs in recent memory with total billings growth of 28% significantly below [the] 34% guide” during the fiscal third quarter. DocuSign’s billings outlook for the fiscal fourth quarter was 22% at the midpoint, which came in significantly below the 32% consensus figure Radke cited in his note to clients.
“With a largely resilient performance vs [work-from-home] peers over the last two quarters, we are surprised that DOCU is seeing significant customer behavior/execution issues cropping up now, and in this magnitude,” he continued.
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Radke called the report a “thesis shifter,” though he kept his buy rating on the stock, arguing that DocuSign has a “first-mover advantage” in its domain and that there are “few signs” that people are shifting back to manual agreements. He cut his target price to $231 from $389.
Evercore ISI analyst Kirk Materne wrote that while DocuSign faced difficult comparisons in its most recent quarter, the company “simply misread the market in terms of demand and that led to a faster than expected deceleration in billings growth.”
But the stock’s sharp move downward indicates that “the damage is essentially done as it relates to the quarter,” he wrote. Further, after speaking with DocuSign’s management team, Materne believes that DocuSign’s fiscal fourth-quarter billing outlook “assumes no improvement in demand [generation] vs. 3Q, which could prove conservative.”
While he called the stock’s selloff “a bit overdone,” Materne admitted that “the reality is this stock just went from a story where investors were thinking about durable growth being in the 30%’s to being in the 20%’s and that’s going to create a pretty material de-rate.”
He cut his price target to $200 from $320, writing that “until DOCU can show that it can generate, not just fulfill, demand on a regular basis, the multiple is capped.” Materne kept an outperform rating on the stock, citing the long-term potential of e-signature technology especially in markets like government where DocuSign is “very early” in its penetration.
DocuSign shares are off roughly 52% from their September closing high of $310.05.