DocuSign stock falls after Citi cuts price target by 50%

DocuSign shares fell by nearly 6% on Friday after Citigroup analysts downgraded the company and other software names. The stock has dropped from an all-time high of $324 in 2021 to about $42 today, raising questions among investors about whether the selloff reflects a bargain or a deeper value trap.

Citi downgrades DocuSign and peers

In a report to clients, Citigroup analysts downgraded DocuSign and other software companies, including SimilarWeb, Autodesk, and Veeva Systems.

While Citi characterized these as strong businesses, it warned that there is no immediate catalyst in the foreseeable future. The analysts said: “This more selective approach would allow us to be more agile with our ratings should we see signs of AI acceleration play out.”

Citi cut its DocuSign price target from $99 to $50. Other Wall Street firms have also reduced their targets this year, including Bank of America, which lowered its rating from neutral to underperform and set a price target of $52.

Across major brokerages, including JPMorgan, Piper Sandler, Morgan Stanley, Royal Bank of Canada, and UBS, targets have been cut. As a result, the average analyst estimate is $61, down from $93 a year earlier.

Valuation metrics point to a lower-priced entry

With the ongoing selloff, DocuSign’s forward valuation has fallen sharply. The forward price-to-earnings ratio is 9.72, below the sector median of 21 and the five-year average of 43. Its forward PEG ratio has declined to 0.39, also below the sector median of 1.34.

Investors have been weighing the company’s post-pandemic challenges. Despite the launch of its Intelligent Agreement Management (AIM) platform, revenue growth has stalled.

Recent performance and near-term outlook

In the most recent results, DocuSign reported revenue up 8% year over year to $837 million, alongside billings up 10%.

Yahoo Finance data cited in the article suggests growth remains on edge in the near term, noting that the period of double-digit growth has ended and that the company lacks clear catalysts to resume that trajectory.

Consensus expectations included in the article call for revenue to rise 8.40% this year to $3.4 billion, followed by 7.4% next year to $3.75 billion.

Share repurchases and EPS support

To support the stock, DocuSign has continued repurchasing shares, a strategy expected to boost earnings-per-share (EPS). The article notes that outstanding shares have fallen from over 205.3 million in 2024 to about 197 million currently.

Potential catalyst and market headwinds

The article suggests a potential catalyst could be an acquisition, given the stock’s depressed valuation. However, it also notes that demand for software companies has weakened in recent months amid concerns about AI disruption.

Technical picture: near all-time lows

On the weekly chart, DocuSign’s share price has declined over the past few years and is hovering near its all-time low of $38.3. The stock is trading below all moving averages, which the article describes as a sign that sellers remain in control.

The article also points to an inverted cup-and-handle pattern, described as a common continuation signal in technical analysis. It adds that sellers may target the next psychological level at $35, and that the move would be reinforced if the stock drops below a key target at $40.