DocuSign (DOCU) stock has been quite the turbulent ride over the past year, plunging into a bear market on two separate occasions. Indeed, the digital agreement cloud-based software company may be viewed as one of the many pandemic-resilient companies that could lose a step once people are ready to ditch remote work for the office again.
Still, given that a hybrid work environment is likely here to stay, even after COVID-19 goes endemic (whenever this may be), DocuSign is more likely to hold its own far better than most other lockdown beneficiaries.
Moreover, e-signatures and digital contracts make everything so easy that even physical workforces ought to prefer it over traditional means. As such, I am bullish on the stock as its growth seems more than sustainable. (See Analysts’ Top Stocks on TipRanks)
DocuSign: The King of Its Niche
E-signatures may be a small niche that rivals within the cloud arena may be inclined to go after.
Currently down around 15% from its all-time high, DocuSign stock remains expensive at approximately 27.9 times sales. Still, given that the company is in the early innings of its growth story, with much of the international market left untapped, the stock certainly isn’t as expensive as some of the other niche cloud plays out there today.
DocuSign is quickly growing into a trusted brand, which should protect its spot at the top of the e-signature space. The only question is whether the company can continue replicating its success at the global level as competition kicks it up a notch. The competitive landscape could get that much more crowded over the coming years, especially with cloud giant Adobe (ADBE) and its Adobe Sign offering.
DocuSign’s Incredible Growth Is Far from Over
Still, DocuSign has a promising pipeline in the workflow platform business (DocuSign’s Agreement Cloud) that investors should be excited about. Regardless of what happens next with the pandemic in 2022, the segment’s momentum looks quite unstoppable at this juncture.
As of the latest quarter, management gave solid guidance, noting that upselling opportunities will help drive the company’s impressive growth rate. Value-adding software offerings that can essentially pay for themselves tend to be viewed as easy sells to any given firm’s already satisfied list of customers.
Moreover, the international expansion opportunity could allow for incredibly high double-digit revenue growth for many years to come. Indeed, many global markets have yet to sign up (forgive the pun) for e-signature services. The growth ceiling remains high, with management previously estimating the TAM (Total Addressable Market) as being worth $25 billion.
Wall Street’s Take
Turning to Wall Street, DocuSign has a Strong Buy consensus rating, based on 15 Buys and one Hold assigned in the past three months. The average DocuSign price target of $336.36 implies 34.1% upside potential.
Analyst price targets range from a low of $275 per share to a high of $389 per share.
The Bottom Line on DocuSign Stock
Upon first glance, e-signatures may not seem so lucrative, but there’s so much more to the DocuSign story.
A huge TAM, a competent management team, continued strength across a wide range of metrics, and technological edge are all reasons to believe that the company is a winner that’s very well poised to continue winning through good economic conditions and bad.
DocuSign is saving a ton of trees with its platform. As the Agreement Cloud introduces a layer of automation, the company looks well-poised to become a household name over the next 10 years, not just in the countries it operates in today but at the international level.
Analysts remain incredibly bullish on DOCU stock, with a consensus price target of $336 and change, implying around 34% upside from current levels.
Disclosure: Joey Frenette doesn’t own shares of any mentioned companies at the time of publication.
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