By Sam Boughedda
Wolfe Research cut its price target on shares of DocuSign Inc. (NASDAQ:DOCU) to $44 from $53, reiterating an Underperform rating on Thursday, in reaction to the news that the company authorized a restructuring plan that will reduce the current workforce by approximately 9%.
Analysts told investors in a research article that the company estimates it will incur charges of approximately $30-$40M in connection with the restructuring plan, of which the majority is expected to be incurred in F3Q23 and F4Q23.
"We find it odd that this action is being taken before the recently hired CEO actually starts, and we would also note that the company did NOT reiterate previously issued guidance, which we take as a negative," wrote the analysts. "We adjusted our model to reflect the company's layoff, increasing our op margins to 24% in FY24. While our FCF estimates rise for next year we take down our target as we see elevated execution risk and would note that DOCU still trades at a meaningful premium to low double digit growth peers on a FCF basis."
Elsewhere, Needham & Company analysts also released a note following the news. They stated they believe the move "right-sizes Docusign's operations for near-term growth," and they expect to remain materially below pandemic levels.
"We find the timing a bit interesting given newly announced CEO Allan Thygesen has yet to start, but we assume he was fully consulted and signed off on the plan since he will be critical in its execution. While management provided few details (we expect more on the company's 3Q earnigns call), we expect the majority of the reduction will not impact client-facing or client-success functions," added the analysts, who maintained a Hold rating on the stock.