On Friday, BofA Securities updated its assessment of Docusign Inc. (NASDAQ: DOCU), increasing the price target to $68.00 from the previous $60.00. The firm has decided to maintain a Neutral rating on the stock. The adjustment comes after evaluating the company's second-quarter results and future outlook, which indicate effective execution of growth and productivity strategies.
Docusign has shown promising signs of billings and revenue growth, potentially moving from low to mid-single digits. This progress is attributed to strong performance across various channels, an improving macroeconomic environment, and the gradual cross-selling of Identity Access Management (IAM) solutions. The new price objective reflects the stable results and successful execution of the company's plans.
The valuation remains neutral despite the positive developments. Docusign's shares are trading at an enterprise value to free cash flow (EV/FCF) multiple of 12.3 times, which is 1.9 times the estimated calendar year 2025 (C25e) growth rate of 7%. This suggests that the near-term upside potential may already be factored into the current share price.
The revised price objective of $68 is based on 14 times the forecasted C25e FCF, an increase from the prior multiple of 12 times. When adjusted for growth, this represents a 2.2 times multiple, which is higher than the software growth at a reasonable price (GARP) group average of 1.1 times. The increase in the price target is justified by the expected free cash flow reacceleration driven by ongoing operational efficiencies within Docusign.
In other recent news, DocuSign (NASDAQ:DOCU) reported a strong second quarter for the fiscal year 2025, revealing a 7% year-over-year revenue increase to $736 million. The company's non-GAAP operating margins reached a record 32%, and free cash flow generation was approximately $200 million. DocuSign launched the Intelligent Agreement Management (IAM) platform, which has received positive initial feedback.
The company reported a stable 99% dollar net retention rate and improvements in usage, utilization, and customer growth. DocuSign also announced a non-GAAP operating income of $237 million, up 40% from the previous year. The company plans to expand IAM to more international markets and customer segments.
Looking forward, DocuSign anticipates Q3 revenue between $743 million and $747 million, and full fiscal year 2025 revenue between $2.940 billion and $2.952 billion. Non-GAAP gross margin is expected to be between 81.0% and 82.0% for Q3 and fiscal 2025, with operating margin projected at 28.5% to 29.5% for Q3 and 29.0% to 29.5% for the full year. Despite a slight expected decline in operating margin due to investments in IAM, DocuSign remains confident in its growth potential.
InvestingPro Insights
With a keen eye on Docusign Inc.'s (NASDAQ: DOCU) recent developments, InvestingPro data indicates a market capitalization of $12.12 billion, underscoring the company's substantial presence in the market. The firm's price-to-earnings (P/E) ratio stands at 12.26, with a slight adjustment to 11.98 when considering the last twelve months as of Q2 2025. This valuation metric suggests a level of investor confidence in the company's earnings capacity relative to its share price.
InvestingPro Tips highlight that Docusign's management has been proactively purchasing company shares, hinting at internal confidence in the firm's value proposition. Another tip points out Docusign's robust balance sheet, holding more cash than debt, which may provide financial flexibility and resilience. Notably, Docusign's gross profit margin impressively stands at 80.26% for the last twelve months as of Q2 2025, which is a testament to the company's ability to manage its cost of goods sold effectively and maintain profitability.
These insights, coupled with the fact that analysts predict profitability this year, can provide investors with a more nuanced understanding of Docusign's financial health and prospects. For those seeking further guidance, there are additional InvestingPro Tips available at https://www.investing.com/pro/DOCU, offering a comprehensive analysis of the company's financial and operational performance.
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