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Why Investors Signed Out of DocuSign Today

What happened

DocuSign (NASDAQ: DOCU) shareholders had a Wednesday they'd rather forget. On the back of an analyst price target cut, the online verification specialist's share price dropped by nearly 2%. That was a deeper fall than that of the S&P 500 index, which sagged by nearly 0.5%.

So what

The bad guy in the story, if you will, was Piper Sandler (NYSE: PIPR) analyst Rob Owens. Wednesday morning, he reduced his DocuSign price target to $65 per share, notably down from his previous level of $75. Owens is, however, maintaining his recommendation on the stock, which is neutral.

The reasons for his move weren't immediately clear, but some caution is certainly warranted with DocuSign stock. It moved sharply higher at the beginning of July, following a report in that the company had become attractive to potential strategic buyers or activist investors.

Such speculation was hardly surprising, following DocuSign's awful first-quarter results reported early last month, and the subsequent blow to its share price. Companies -- particularly tech companies -- whose stocks fall to levels affordable by interested parties are often considered to be ripe takeover candidates.

Compounding that, and fueling takeover scuttlebutt, CEO Dan Springer vacated his position shortly after those unhappy quarterly figures were published.

Now what

The Piper Sandler analyst is only the latest in a line of prognosticators reducing their targets on DocuSign stock -- or even, in certain instances, downgrading their recommendations. While the stock might be teasing its bottom, I'm not sure I'd be an enthusiastic buyer. This might just be a "don't catch the falling knife" situation.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DocuSign. The Motley Fool recommends the following options: long January 2024 $60 calls on DocuSign. The Motley Fool has a disclosure policy.


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