Investing.com -- JPMorgan upgraded DocuSign (NASDAQ:DOCU) to Neutral and raised its price target to $75 in a research note on Monday.
The investment bank highlighted the "potential for gradual improvement in business trends" following a prolonged post-pandemic reset.
The firm acknowledged that DocuSign shares have "treaded water for the last three years" and are down 25% since early December, underperforming the broader market.
However, JPMorgan sees "some subtle improvements developing in fundamental business trends" and believes the company's revamped management team has made "a series of logical and pragmatic moves" that could help restore investor confidence.
"We see the potential for the company to deliver ongoing stabilization or improvement in growth rates," the analysts noted.
DocuSign’s core eSignature business appears to be stabilizing, with JPMorgan highlighting "the volume of envelopes sent and consumption" as indicators of resilience.
However, the report cautioned that "macro remains a material wildcard", particularly with DocuSign’s "exposure to mortgage-related end-markets" and a competitive landscape that includes Adobe’s Document Cloud suite.
One area of optimism is said to be DocuSign’s Intelligent Agreement Management (IAM) suite, which JPMorgan believes could "support an improvement in bookings trends over the next several quarters" and potentially contribute to future growth.
The firm noted that "80% of its eligible reps closed three or more deals since launch as of FQ3", suggesting early traction for IAM.
Despite the upgrade, JPMorgan remains cautious on DocuSign’s GAAP profitability, noting that "stock-based compensation remains a disproportionate amount of free cash flow relative to peers."
The firm concluded that risk/reward is fairly balanced, with business trends showing "subtle signs of stabilization to improvement" but requiring patience.
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