DocuSign Stands Out Among Stay-At-Home Stocks

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San Francisco-based DocuSign (NASDAQ:DOCU) stands out among so called stay-at-home stocks because it provides an essential service to businesses and governments. Investors should look to buy any dip in DocuSign stock.

DocuSign stock
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While many stay-at-home stocks such as streaming service Netflix (NASDAQ:NFLX) and stationary bike Peloton (NASDAQ:PTON) are nice services to have while sheltering in place, they are not essential.

DocuSign, on the other hand, enables companies and governments to manage and process legally binding agreements that are essential to the effective functioning of businesses, markets and democracies around the world. Signatures processed by DocuSign are compliant with government and securities regulations throughout the U.S. and Europe and legally binding in more than 180 countries worldwide.

And with social distancing likely to remain in place for some time and more organizations operating remotely, DocuSign is becoming an indispensable part of the way business is being conducted all over the world. It’s the main reason why DOCU stock’s price has more than doubled since March and is now trading near its all-time high of $180.45.

DOCU stock is now up over 260% from its first day of trading following an initial public offering in April 2018. The company recently replaced United Airlines (NASDAQ:UAL) on the NASDAQ 100 Index and looks set to keep on rising in coming months.

Revenue of More Than $1 Billion

DocuSign has been on quite a run this year. In addition to a stock price that has risen from under $75 per share on New Year’s Day, the company is projecting revenue of $1.32 billion for its full fiscal year, which ends in January 2021, implying 35% growth.

And while the company has benefited from the Covid-19-induced lockdown measures, DocuSign’s leadership feels confident that business has turned a corner in terms of working remotely and that it fits squarely into the cloud-based revolution that is reshaping how the world works.

As DocuSign Chief Executive Officer Dan Springer said on a June 15 conference call with analysts: “We don’t anticipate customers returning to paper.”

DocuSign’s top-line growth has been particularly impressive over the past 12 months. The company’s revenue growth rose 39% year-over-year in the first quarter of fiscal 2021, following 38% annualized growth in the fourth quarter of fiscal 2020.

What analysts particularly like is that DocuSign’s customer growth has been among large, medium and small enterprises. They’ve been signing up companies that are listed in the Global 2000, as well businesses with fewer than 25 employees.

In the fourth quarter of fiscal 2020, enterprise and commercial customers grew 24%. Equally impressive, once customers sign on they tend to increase their spending every year. DocuSign customers with annual contract values in excess of $300,000 grew 46% year-over-year.

A Sizable Market

While electronic signatures may not seem fun or sexy, the market for e-signatures is sizable and growing. The global market for e-signatures has been estimated at between $25 billion and $50 billion annually, and can grow beyond businesses and governments to include everyone from doctors to sports referees.

Increasingly, the global economy depends on the ability to create, store and share accurate records and documents. Not only are DocuSign agreements legally binding in more than 180 countries, they are available in 43 different languages and compliant with the laws and standards in many different jurisdictions.

With the majority of DocuSign’s business based in the United States, the company feels it has plenty of room to grow and expand internationally, notably in Asia and eastern Europe.

The company is currently focused intensely on Japan, where it says only about 2% of businesses are currently using electronic signatures. In April, DocuSign announced a partnership with Japan’s Fuji Xerox, a joint venture between Japan’s photographic firm Fujifilm Holdings and the American document management company Xerox (NYSE:XRX). Under terms of the deal, Fuji Xerox will bring e-signature and Contract Lifecycle Management solutions to the Asia-Pacific region.

While DocuSign is not yet profitable, that is because the company continues to invest heavily in its own expansion and growth.

The Bottom Line on DocuSign Stock

DOCU stock has been on a run since it debuted in 2018, and the technicals suggest that it is currently overbought. That doesn’t mean that DocuSign stock isn’t a good long-term investment.

The current consensus among 18 investment analysts is to “buy” DOCU stock. That buy rating has been in place since June 2019. Among 16 analysts offering 12-month price forecasts for DocuSign, the median price target is $163, with a high estimate of $200 and a low estimate of $140. The median estimate represents a 5% decrease from the last price of $171.61.

The bottom line on DOCU stock is that investors should look to buy any dip in price and hold for the long term. DocuSign is poised to top $1 billion in annual revenue, is firing on all growth engines, and is capitalizing on the work from home trend and digital transformation.

The stock has too much going for it to be ignored. The e-signature company has only begun to tap its potential and the global market for electronic documents. Investors would be smart to sign on to DocuSign stock and ride its future growth trajectory.

As of this writing, Joel Baglole did not own any shares of the aforementioned securities. 

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

 


Article printed from InvestorPlace Media, https://investorplace.com/2020/06/docusign-stock-stands-out-among-stay-at-home-peers/.

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