By Senad Karaahmetovic

DocuSign shares (NASDAQ:) fell almost 25% Friday in premarket trades after DocuSign reported Q1 results that were worse than expected and reduced its guidance for the full year.

Docu Q1 adjusted earnings per share were 38c, down from 44c the previous year and lower than the analysts consensus of 46c. Revenue was $588.7 millions, which is 25% higher YoY than the analyst’s expectations of $581.8million.

DocuSign’s subscription revenues surpassed the consensus estimate of $564.6 millions by generating $569.3million. The billings of e-signature companies reached $613.6 millions, an increase of 16% YoY. This is higher than the analyst estimate at $578.5 million.

Analysts had expected 80.5%, but the adjusted gross margin was 81%.

DocuSign anticipates revenue of between $600m and $604m for the second quarter. Analysts were expecting $602.2 million. According to consensus estimates, subscription revenues will range from $583 million up to $587 millions in the second quarter. This is compared with $581 million. Analyst estimates for Q2 billings of $659.3million are far lower than the company’s $599 to $609 million.

DocuSign anticipates full-year revenue of between $2.47 billion and $2.48 trillion, while analysts expect $2.48 trillion. Analyst estimates were $2.4 billion. The company anticipates that FY 2023 subscription revenue will range between $2.39 and $2.41 trillion. According to the company, FY 2023 will be $2.52 billion to $2.54 billion. This is down from $2.71 to $2.73 trillion, while analysts had been estimating $2.72.

Kirk Materne from Evercore ISI, an analyst downgraded DocuSign to In Line (from Outperform) with a target price at $75.00 per shares. That’s down from $100.00. The analyst sees “too many moving parts” and better risk/reward elsewhere.

“Not huge fans of the post EPS downgrade and while DOCU shares are probably close to a bottom at current levels if one is taking a longer-term view, we believe the combination of tough compares and continued execution challenges/turnover in the field means any meaningful rebound in billings growth is still further out than we hoped,” Materne said in a client note.

The analyst added that “the upside is very limited.”

“We believe until billings accelerates back above 20%, the margin guide needs to point investors to a 20%+ op. margin outlook for FY24 to offset the revenue deceleration.”

RBC analyst Rishi Jaluria cut the price target on DOCU stock to $80.00 per share from $85.00 but remains Outperform-rated despite “disappointing” results.

“DOCU reported a disappointing F1Q23, with a cut in FY billings guidance being the headline, leading shares down 23% AMC. Our other key takeaways were: 1) management underestimated the impact from higher interest rates as well as pulled-forward demand during COVID; 2) while GTM changes are now complete, execution could take longer than expected; 3) underlying metrics underperformed, except net adds; and 4) FY23 margin guide kept, despite investor concerns of downward revisions,” Jaluria explained in a note.