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DocuSign says it’s an AI winner. Why ChatGPT is not a threat to the stock.




DocuSign shares rose on Friday as the e-signature company showed signs of stabilizing from a post-pandemic slump. Its long-term prospects may be enhanced by artificial intelligence.

DocuSign (ticker: DOCU ) shares were down 2.9% at $56.81 at 2:27 p.m. Friday, after trading up as much as 11% in early trading.

The immediate reason was the company’s first quarter earnings and increased guidance. However, there were also signs of optimism around the AI-powered products.

AI models like ChatGPT may initially appear to be a threat to DocuSign’s business, if they are able to generate and modify contracts. However, the company is confident that customers will turn to DocuSign for specialized contract services.

“If you look at DocuSign, we have deep experience built over years of building deal-specific models. This is not the same as drafting a high school essay,”[ads1]; DocuSign CEO Allan Thygesen told analysts on an earnings call Thursday .

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DocuSign has a history of AI integration before the recent boom in interest in the technology. It bought Seal Software, an AI analytics company, for $188 million in 2020. It also recently said it would use Microsoft
‘s

(MSFT) OpenAI technology to provide contract summaries.

“Generative AI can provide a new opportunity … by transforming the deal workflow architecture with new products and improvements powered by artificial intelligence,” Wedbush analyst Daniel Ives wrote in a research note Friday.

Wedbush has a neutral rating on the stock, but raised its price target to $67 from $60.

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Analysts at RBC Capital Markets wrote in a research note that generative AI could push more customers to use DocuSign’s ‘contract lifecycle management’ products – software used to manage contracts over the longer term.

RBC reiterated a Sector Perform rating and a $59 target price for DocuSign, noting that it was too early to judge the potential success of the product innovation while the company faces macroeconomic headwinds.

Corrections and enhancements:

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Allan Thygesen is CEO of DocuSign. An earlier version of this article said he was DocuSign’s head of investor relations.

Write to Adam Clark at adam.clark@barrons.com



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