The intense and relentless growth of e-signature start-up DocuSign (NASDAQ:DOCU) has turned heads in the trading community. The powerful price move in DocuSign stock continues to generate buzz as investors consider whether the momentum is sustainable.
Perhaps an argument could be made that DocuSign is just part of the relatively unscathed enterprise software niche. After all, software and more generally, tech, has fared comparatively well in the wake of the novel coronavirus pandemic.
Plus, DocuSign is considered a cloud company and that has been a consistently strong market sector. Still, DOCU stock’s robust performance isn’t just part of a larger movement. Rather, it’s a reflection of a future-proofed company with the financial data to prove it.
A Closer Look at DocuSign Stock
The negative impact of the coronavirus was little more than a blip on the radar for DOCU stockholders. In hindsight, prescient investors could have picked up some shares during the trough in March and held on for some nice-and-easy gains.
Indeed, the coronavirus crisis only seems to have accelerated DocuSign stock’s ascent. The share price was going up the staircase from August of last year to March of 2020. Then it decided to take the elevator as the stock price briskly climbed from around $70 to $150 in three months’ time.
Today, there’s no question as to whether the bulls or the bears are in control. Instead, the question is when the bulls will relinquish their complete control of the price action. Gravity must take over at some point, but until there’s reason to believe otherwise, the buyers are in charge and the sellers are in hibernation.
A White-Swan Event
You might have heard of the term “black-swan event,” which is when a rare, drastic, and unexpected event profoundly impacts the market. Generally, black-swan events are negative, such as the financial crisis of 2008 and 2009.
In the case of the coronavirus as it pertains to DocuSign stock in particular, we might call it a “white-swan event.” That’s because, while the event was certainly sudden and unexpected, its impact has mostly been positive for DocuSign’s business.
That’s not to downplay the tragic impact of the coronavirus on the population’s health, wealth, and well-being. It’s a very unfortunate event and we should all hope that it’s resolved soon. But for DocuSign, there’s no denying that the work-at-home trend has accelerated the demand for e-signatures and cloud-based software solutions.
Was DocuSign’s Success Inevitable?
Interestingly, DocuSign CEO Dan Springer almost seems to suggest that the shift to e-signatures was inevitable irrespective of the pandemic:
[F]or organizations that hadn’t already embraced DocuSign for eSignature… the pandemic has been a catalyst for the greater digital transformation of their end-to-end agreement processes. We always believed this transformation will happen and that a unifying platform for agreements will be needed. COVID-19 is just happening faster.
Is the subtext here that DOCU stock would have taken off like a rocket with or without the pandemic? If so, then that’s an audacious suggestion. Either way, it’s likely that businesses will continue to seek the convenience and flexibility of e-signatures even after the crisis has subsided.
Besides, the company’s financial results are rock-solid and the data proves it. For the first quarter, DocuSign reported $297 million in revenues, representing a 39% increase. Plus, the company’s quarterly billings totaled $342 million, signifying an outstanding 59% increase.
In addition, DocuSign’s customer count for the first quarter came to nearly 661,000. That’s an addition of almost 68,000 customers. As more businesses adopt digital signatures and pivot to cloud-based software, DocuSign’s customer count is bound to expand.
The Takeaway on DOCU Stock
If DocuSign’s CEO claims that he foresaw the emergence of “a unifying platform for agreements,” then perhaps he’s some sort of modern-day Nostradamus.
Or, maybe he’s just doing the usual chief-exec jawboning. That aside, DOCU stock’s rapid run isn’t likely to end anytime soon as the company’s financial results and the world’s shift to e-signatures and the cloud should persist well into the future.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.