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RBC downgrades DocuSign as company deals with CEO search, challenging short-term environment

DocuSign is effectively on hold until it finds a new CEO, following Dan Springer’s surprise departure in June, according to RBC. The firm downgraded shares of the company to sector perform from outperform and lowered its price target to $65 – in line with where shares closed Friday – from $80. DocuSign shares dropped more than 4% in the premarket. “We still see a path to accelerating growth, but it requires better sales execution, new use cases, stronger international traction (especially in newer markets), and greater adoption of CLM and other products,” Rishi Jaluria wrote in a Sunday note. “These turnarounds take time, and it could take several quarters, even after a new CEO joins, before we start to see signs of a successful turnaround.” The company also has a slew of ongoing execution issues that it needs to work through, according to Jaluria. This includes high employee turnover, which is expected to continue without a permanent CEO at the helm, he wrote. “It’s very clear in retrospect that DocuSign salespeople got complacent during COVID, with demand coming to them, as well as benefits from overages, and did not proactively generate demand or new use cases,” Jaluria said. Beyond these issues, DocuSign is facing a tough set up in the near-term and may underperform Wall Street’s expectations in the coming quarters. This may further the credibility gap it has with investors, which will take some time to fill back in, Jaluria said. “The fact is DocuSign has guided down billings three quarters in a row, missed its own billings guidance, and, in our view, downplayed both the benefits from overages/early renewals, as well as its total exposure to mortgages/ loans,” Jaluria wrote. “We believe it will take a while for DocuSign to regain credibility.” DocuSign shares have taken a beating this year, losing more than 56% of their value in that time. The stock is also down 77% over the past 12 months. –CNBC’s Michael Bloom contributed to this report.

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