Today was certainly a tough day for DocuSign, Inc. (NASDAQ:DOCU) following its 6% drop. However, when you step back and look at the bigger picture… it’s actually been a great year for the company and it should continue to climb over the longer term, thanks to its strong fundamentals (more on those in a moment).
From March 12, 2020 to today, the stock has surged a stunning 173%. That’s impressive considering this rise was during the start of the coronavirus pandemic and subsequent bear market and worldwide recession.
The reality is that when the U.S. imposed stay-at-home orders to slow the spread of the coronavirus, there was a major shift to the work-from-home trend, as businesses were forced to pivot to remote working so they could keep their doors open.
Many turned to DocuSign for their e-signature needs. As you may recall, the company developed e-signature technology in 2003. Eliminating the manual paper process gives companies faster turnaround times, limits errors and reduces expenses.
Consider this: 18 of the top 20 global pharmaceutical companies, 10 of the top 15 global financial services companies and seven of the top 10 global tech companies all utilize DocuSign’s technology. In addition, 800 federal, state and local government agencies utilize the company’s platform.
Through DocuSign’s cloud-based platform, companies can develop, upload and send agreements to all stakeholders for electronic signatures. The agreements can be approved on practically all devices and from nearly anywhere in the world. In fact, DocuSign has more than 500,000 customers and millions of users in more than 180 countries.
So, it should come as no surprise that the company has grown its top and bottom lines nicely.
DOCU Crushes Fourth-Quarter Earnings Estimates
Following the closing bell on Thursday, DocuSign, Inc. crushed analysts’ earnings and revenue estimates for the fourth quarter in fiscal year 2021. Company management noted that “fiscal 2021 was a milestone year for DocuSign,” as the company’s services were in strong demand in the “work-from-anywhere” environment.
Fourth-quarter revenue soared 57% year-over-year to $430.9 million, with subscription revenue accounting for $410.2 million. Fourth-quarter earnings surged 208.3% year-over-year to $0.37 per share, up from $0.12 per share in the same quarter a year ago. The analyst community was expecting fourth-quarter earnings of $0.22 per share on $407.65 million in revenue, so DocuSign posted a whopping 68.2% earnings surprise and a 5.7% revenue surprise.
For fiscal year 2021, DocuSign achieved total revenue of $1.5 billion and earnings of $0.90 per share. That represents 190.3% annual earnings growth and 49% annual revenue growth. Analysts were expecting full-year earnings of $0.74 per share on $1.43 billion in revenue.
Looking forward to the first quarter in fiscal year 2022, DocuSign expects revenue between $432 million and $436 million. And for fiscal year 2022, DocuSign looks for revenue to come in between $1.96 billion and $1.97 billion.
Now despite the phenomenal earnings results, the stock stumbled today. But the truth of the matter is the stock is caught up in the NASDAQ’s selling, which brought the tech-heavy index down more than 1%.
The 10-year Treasury yield is on the rise again, up to about 1.66% today, which is spooking investors. We saw this last week when Federal Reserve Chair Jerome Powell sparked the most-recent surge in Treasury yields after he stated the Fed’s easy money policies would remain in place for the foreseeable future. It seems he remains in denial that inflation is brewing. The Fed likes to deny that there’s inflation, and that’s a real problem especially when Wall Street sees rising Treasury yields and higher crude oil prices. Crude oil prices jumped more than 2.5% last Wednesday alone.
It’s important to note that rising Treasury yields can derail interest rate sensitive value stocks, but growth stocks have historically prospered in a rising interest rate environment. I discussed exactly why this is in today’s Power Options Weekly Update. You can catch up here if you haven’t read it yet.
But let me say now that given DocuSign, Inc.’s strong fundamentals, I fully expect it to bounce back. It’s why I recommended a long-term anticipation securities (LEAPS) call trade on the stock in my Power Options service last week. DOCU might consolidate in the near term, but there is still plenty of upside ahead. If you’re interested in the specific option I’m recommending, plus my two newest trades I encourage you to sign up now. The options remain under my buy limit, making now a great time jump in before the stocks start firing on all cylinders, and take these call options with them.
If you’re not an options expert, that’s perfectly okay! I am especially proud that my Power Options service is easy for brand-new options traders and pros alike, as all of my recommendations are very straightforward and easy to follow. I also offer a LEAPS Trading Primer and educational videos to help get you started. Click here now to join Power Options so you can start trading today!
Sincerely,
Louis Navellier
The Editor (Louis Navellier) hereby discloses that as of the date of this email, the Editor (Louis Navellier), directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
DocuSign, Inc. (DOCU)
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.
