DocuSign (NASDAQ:DOCU) has been making a habit of beating analysts’ expectations, but the company got an unexpected catalyst when millions of Americans were forced indoors. And as a result, DocuSign stock has been one of the shining stars of 2020.
Companies realized that “contactless delivery” applied to more than just fast food and groceries. From real estate transactions to medical appointments, consumers needed a way to efficiently take care of paperwork without leaving their homes.
I believe the long-term outlook for DocuSign stock is outstanding. But for right now, it looks a little overheated.
DocuSign Stock and the Future
The reason why DocuSign stock looks like a great long-term investment is that it just makes sense. I was introduced to DocuSign before the company went public. It made sense then, and it still makes sense now. The story is one of convenience more than safety.
Sure, if it reduces paper and the potential for germs to be passed, that’s great, but the reality is that what DocuSign enables just makes sense.
The problem with some technologies is that they have a limited use case. Sometimes potential customers realize that although there may be an app for that, they can’t imagine why they ever would use it.
That’s not the case with DocuSign. Once you use the technology for the first time, you realize it’s life-changing, and you wonder why it took so long for such a thing to exist. Furthermore, DocuSign is about the future, not the past. If you’re old enough to remember life before televisions had remote controls, you’ll understand the analogy. Even if you could buy a television today that didn’t come with a remote control, why would you?
It’s the same with DocuSign. In the short term, I suppose many home buyers will still get writer’s cramp to sign their mortgage documents. But increasingly the absence of a technology like DocuSign’s will be seen as an indication of a company that is behind the times.
The Company Does Not Rely on Work From Anywhere
The work from anywhere movement has certainly been a boost to DocuSign stock. As millions of American workers were staying at home to help confront a public health emergency, technology like DocuSign helped ensure that secure transactions could be made without either party having to leave their home.
And while it’s true that the work from anywhere movement may be with us for some time, this is neither the only market, nor even the primary market for DocuSign.
The company does offer individual subscriptions. But honestly, most consumers could get by with the free subscription. However, DocuSign is more about the companies, like realtors and doctor’s offices, who pay for the subscription because they are generating thousands of paper documents a month.
Is Now the Right Time to Buy DocuSign Stock?
That’s a tougher question. As much as I like the long-term outlook for DocuSign, I have to admit that it’s looking a little overbought, and investors seem to agree. In the last five trading days ending June 8, DOCU stock is down almost 5%. However, at one point it was down over 10%.
A recent analysis in Seeking Alpha outlines why an investment in DocuSign may grow 10 times in the next 10 years. That’s a bold statement, but one that may very well be true. It also doesn’t mean there won’t be dips along the way. This may be one of those times.
DocuSign is not dependent on one specific industry. It’s also not dependent on people working remotely. It’s simply a convenient, digital alternative. But it’s okay to look at DocuSign as an example of too much too fast.
If you’re willing to take a long position, then by all means buy DocuSign stock. But I wouldn’t blame you if you wanted to wait until the big investors get back from their summer vacations.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.
