The stock price of DocuSign (DOCU) has been dipping more than the broad market indices. While the company’s product is six to seven times larger than Adobe Sign, the company still isn’t cheap from a fundamental perspective. However, it’s also not cheap relative to its rivals. And if you’re looking for a way to invest in the cloud, DocuSign might be the right choice.
DocuSign (DOCU) Stock Price Dips More Than Broad Market Indices
DocuSign (DOCU) stock has fallen more than 8% in the past year, but that’s not surprising. The company’s stock is a “pandemic winner” because it has enjoyed rapid growth relative to broad market indices. During September, DocuSign’s stock price topped $300, but it has dipped more in recent weeks compared to the broad market indices. The company’s first-quarter revenue grew 25% compared to the same quarter last year. Moreover, DocuSign’s full-year guidance suggests earnings growth of 18% for fiscal 2023 and 16% for the next three quarters.
DocuSign is a software provider based in the United States. The company guides for revenue of $2.5 billion in its fiscal 2023. At this point, the enterprise value of the company is $12 billion. The company is also reasonably profitable, and its price-to-revenue multiple is below five times. Further, the company trades at about 24x free cash flow, which implies little or no growth going forward.
DocuSign’s share price has dipped over 42% this week, with a recent after-hours session of 23%. The company had reported revenue growth of 25% year-over-year, which was slightly better than analysts’ expectations. Meanwhile, adjusted net income declined 16% to $77.5 million, which fell eight cents short of analyst expectations. DocuSign’s net loss tripled to $27 million, or a 23% drop.
A look at DocuSign’s performance in the last quarter reveals that its underlying growth has decelerated remarkably. As a result, DOCU stock has fallen more than the broad market indices, and it has not yet reached the valuation that investors need to make a smart move. The company has been hurt by the weakness of the broad market, which has contributed to its stock price dips.
DocuSign isn’t Cheap from A Fundamental Perspective
A high-growth stock doesn’t need to be cheap from a fundamental perspective. DocuSign isn’t cheap from a fundamental perspective, but that doesn’t mean it isn’t appealing. Even though its first-quarter revenue was up 25%, the company’s full-year guidance calls for 18% growth in fiscal 2023 and 16% growth in the remaining three quarters. This suggests that investors should remain cautious when evaluating the stock, and don’t purchase it in an effort to make a profit.
If you’re on a tight budget, DocuSign isn’t the only option. There are plenty of alternatives online. One such competitor is DocHub, which is cheaper than DocuSign. The service is highly customizable, with form fields, expiration settings, and instructions for all parties. It’s not cheap, but it’s worth it if you’re a business owner.
To use DocuSign for your business, you should opt for business or enterprise plans. These plans give you unlimited documents, onboarding of users, and collection of payments. However, the Personal and Business Pro plans are not cheap from a fundamental standpoint, but they offer more features for smaller businesses, freelancers, and individuals. In addition to a desktop version, DocuSign also has a mobile application. You can use your smartphone, tablet, or laptop to access the service. Moreover, the free plan comes with limitations, so you should consider upgrading to a premium plan if you want to use advanced features.
DocuSign isn’t cheap on a fundamental level, but it’s definitely worth considering if you need an electronic signature solution. With a wide ecosystem of out-of-box connectors and a 750,000-plus user base, it’s easy to see why the solution is so popular. It also has the advantage of being able to provide a fast and reliable electronic signature collection.
DocuSign’s Product is Six To Seven Times as Large as Rival Adobe Sign
DocuSign continues to dominate the eSignature and CLM market. Although rival Adobe Sign is booming, its overall revenue run rate is several times lower than DocuSign’s. Gartner recently confirmed the company’s leadership in the CLM space, and management reiterated its operating margin target of 20 to 25 percent in four years. It plans to expand its product to more international markets, as well as add notary services.
A strong competitor for DocuSign is Adobe, which is making strides in the cloud-based document storage market. While Adobe Sign is a much smaller player than DocuSign, it has been building momentum since its launch in 2011. If Adobe can successfully implement Sign as an alternative to paper documents, it will encroach on DocuSign’s market share.
Banks and other institutions could also benefit from DocuSign’s notary capabilities. In a post-COVID world, a new type of customer can easily sign documents without visiting a bank branch. The process could be handled remotely, from a call center or branch. Banks would also benefit from the service, as it could attract consumers who are seeking new ways to use online banking services. As a result, DocuSign is likely to become a valuable competitor in other sectors as well, such as the telecom and health care industries.
RBC Capital analyst Alex Zukin raised DocuSign’s price target to $275 from $230. Zukin maintained his Outperform rating on the company and noted that Q2 earnings results were “very strong” and included a 20% beat on billings. Zukin also cited a recent Work 2.0 report that reveals that two-thirds of respondents believe digital signatures are essential for the future of business.
DocuSign Offers Cloud Offerings
DocuSign is a cloud-based software site that automates agreement processes and provides a legally binding electronic signature. Users can manage the various aspects of a documented business transaction and manage data and identity, forms, workflow automation, and more. DocuSign also provides a free trial that lets you use its service for 30 days. However, if you are not entirely satisfied with the service, you can opt for a paid plan.
DocuSign’s DocuSign Agreement Cloud includes a variety of new products and integrations that simplify and accelerate the contract-signing process. It also provides security and increased transparency, enabling users to make better business decisions and reduce risk. The suite includes three new products: eSignature Cloud, Document Generation Cloud, and Contract Lifecycle Management Cloud. The DocuSign cloud offers more than 400 apps, including contract generation and management, as well as the DocuSign platform.
DocuSign provides services for various industries, including healthcare and real estate. Its services cover document generation, eSignature, and DocuSign Contract Lifecycle Management. The company earns from annual and monthly subscriptions. The real estate sector has a high volume of agreements, and DocuSign’s offerings can assist property developers, brokers, and agents. The financial industry is another sector that relies on contract generation and agreement management.
One of the primary advantages of DocuSign’s cloud offerings is that it provides multiple signers with security and privacy. The cloud application stores documents securely in the cloud. And DocuSign can integrate with various applications and workspaces. Its APIs make it easy for developers to integrate the cloud into other applications. The company also provides 24×7 application support to help clients with their projects. These services are provided by a DocuSign premier partner, CherryRoad.
DocuSign’s Remote and Hybrid Working Trend is Likely to Continue in The Coming Quarters
DocuSign has been experiencing a decline in demand for electronic signature technology recently, despite the fact that it forecasts positive first-quarter earnings. The company will have to develop innovative sales strategies, as well as continue to use hybrid working models in order to remain profitable and grow. Here are three reasons why this trend is likely to continue in the coming quarters.
DocuSign’s stock has declined 18% in the last month and is up just 16% year to date. This outperformance is at odds with the broader theme of Work From Home Stocks, which has been struggling this year. Investors are repurchasing cyclical names such as Covid, which could be reopened in a few months. Additionally, DocuSign’s Q1 FY’22 results beat expectations, resulting in a higher P/S ratio and a better outlook for the full year.
With revenues projected to grow by 40% in FY’22, DocuSign is at a significant premium over its competitors. The company is trading at approximately 20x projected FY’22 revenue, which should continue to boost profits. And with a large addressable market in e-signature software, DocuSign is positioned for long-term growth and scalable profits. The company has been able to achieve high gross margins and is forecasting higher revenue growth in the coming quarters.
Despite the challenges of remote and hybrid working, companies must continue to adapt to the changes in the workforce. This means balancing different expectations for workers, as well as providing the necessary training and feedback. In addition to this, managers must also consider whether employees are able to meet the demands of different jobs while remaining productive. In this scenario, they must adapt their management practices to fit the requirements of the new hybrid workforce.
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