DocuSign (DOCU) CEO Dan Springer is owning up to some execution mistakes in the third quarter that did their part to send shares down more than 40% on Friday as traders digested the company's latest earnings report.
But, Springer told Yahoo Finance Live he will buy shares next week as the one-day plunge doesn't make sense given DocuSign's leadership position and growth potential.
"I am surprised, I'll be straightforward with you. I do not see the reaction in the stock price to be commensurate with what I think is a much less dramatic business performance change," Springer said. "I've made two phone calls since I saw the reaction, first was to [my general] counsel, and I asked him, if there is anything that stops me from buying stock. He said as long as you wait until the window opens on Tuesday, and you haven't been selling shares, so therefore you can you can buy all you want. And the second one was to my financial manager, and lined up the first $5 million of purchases. So if the stock doesn't dramatically increase, I'll be continuing to buy shares."
The sharp negative market reaction comes as DocuSign's third quarter billings growth lagged Wall Street forecasts as customers put off purchases with workers beginning to return to the office. Springer added the company perhaps took its eyes off the ball with respect to obtaining new customers, something he plans to course correct by shaking up the executive suite at the company.
Here is how DocuSign performed compared to Wall Street estimates for the third quarter:
Net Sales: $545.5 million vs. $532.6 million
Billings: $565 million vs. $594 million
Diluted EPS: $0.58 vs. $0.46
For the fourth quarter, DocuSign said it sees billings growth of about 20% versus the 28% realized in the third quarter.
Wall Street analysts moved quickly to downgrade their ratings and price targets on DocuSign, including UBS and JPMorgan. Wedbush analyst Dan Ives — a long-time DocuSign bull — had especially harsh words on the quarter, calling it a "debacle."
"While DocuSign was a clear benefit from the work-from-home theme and was one of our favorite growth plays over the past few years, we believe the company is seeing a much more difficult selling environment as the company expands into broader CLM deals with e-signature going through a major growth transition in the field. DocuSign remains in firm position to massively expand this moat into broader strategic deals, however it appears this transition will be rocky and the risk/reward at current levels is not favorable to stay bullish with the clock hitting midnight on the DocuSign hyper-growth story in our view," Ives said.
Ives downgraded his rating on DocuSign to Neutral from Outperform.