DocuSign (DOCU) provides cloud-based software with a focus on e-signature solutions. I am bullish on the stock.
Last year, DocuSign was propelled into the spotlight in the wake of the COVID-19 pandemic’s emergence. As e-signature software became a virtual necessity for many businesses, DOCU stock surged to fresh highs.
That rally wasn’t destined to last forever, though. Lockdown restrictions eventually eased, and the enthusiasm over DocuSign subsided during 2021’s back half.
To make matters worse, a poorly received earnings report and a devastating downgrade put DOCU stock in the doghouse.
Yet, DocuSign still has buyers – including a famous fund and a company insider with serious skin in the game. (See Insiders’ Hot Stocks on TipRanks)
Waves of Agony
From August to December, DOCU’s stock price was cut in half. At around $150, enterprising investors might consider whether there’s a bargain here.
Before jumping into the trade, though, it’s important to check DocuSign’s third-quarter 2021 results. As TipRanks contributor Marty Shtrubel put it, the market responded with “waves of agony.”
The top and bottom-line results were actually pretty good. DocuSign’s revenue increased by 42.4% year-over-year to $545.46 million, which topped the analyst community’s expectation by $14.21 million. Plus, DocuSign’s non-GAAP EPS of $0.58 beat the Wall Street consensus estimate by $0.12.
On the other hand, DocuSign’s quarterly billings totaled $565.2 million. That figure was substantially below the company’s prior guidance of $585 million to $597 million.
Worst of all, DocuSign’s forward guidance called for revenue of $560 million at the midpoint. That’s a disappointment compared to analyst forecasts of $573.8 million.
ARK Invest Swoops In
Adding insult to injury, Morgan Stanley analyst Stan Zlotsky downgraded DOCU stock from the equivalent of Buy to the equivalent of Hold, while drastically slashing his price target from $350 to $165.
On top of all that bad news, it’s been reported that DocuSign COO Scott V. Olrich sold $1.9 million worth of DOCU shares.
However, not every DocuSign insider is selling. Evidently, CEO Dan Springer took advantage of the DOCU stock post-earnings sell-off, and bought 33,675 shares for a combined $4.8 million.
Even more interestingly, Ark Invest Chief Executive and Chief Investment Officer Cathie Wood has taken an interest in DocuSign.
Wood’s ARK exchange-traded funds purchased nearly 747,000 DOCU stock shares on December 3, the day the stock gapped down heavily due to its earnings report. Amazingly, the ARK Innovation ETF (ARKK) acquired 461,662 DocuSign shares – a huge vote of confidence, to say the least. Docusign currently makes u 1.47% of the ARKK ETF.
Wall Street’s Take
Turning to Wall Street, DOCU comes in as a Moderate Buy, based on nine Buys, seven Holds, and one Sell rating assigned in the past three months. The average DocuSign price target is $209.08, implying 35.9% upside potential.
The Takeaway
There’s definitely been selling of DOCU stock – make no mistake about that.
However, some well-informed folks also appear to be buying the stock at a discount.
At the end of the day, the opinions on DocuSign are mixed. If you feel that the sell-off in DOCU stock was overdone, though – or if you just want to follow Wood’s trades – then a long position might be justified.
Disclosure: At the time of publication, David Moadel did not have a position in any of the securities mentioned in this article.
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