tiprankstipranks
Is DocuSign Signed Up for Growth?
Stock Analysis & Ideas

Is DocuSign Signed Up for Growth?

After a sharp drop in share prices on December 3, cloud-based software provider DocuSign (Nasdaq:DOCU) recorded a jump of almost 11% at yesterday’s market close. This was a result of investors’ disappointment in the company’s slowing growth, and management’s attempt to resurrect the dwindling share prices.

Last week, the stock suffered an alarming volume of sell-offs after the company’s third-quarter fiscal 2022 results failed to impress investors. Interestingly, DocuSign CEO Daniel Springer grabbed this opportunity to buy $4.8 million worth of DocuSign shares on December 8 in an Informative Buy, according to TipRanks’ Insider Trading tool.

Competition Waters Down Prospects

Importantly, the stock volatility was a result of a competitive digital agreement services industry. While the company faces the strongest competition from Adobe (ADBE) in the global electronic signature industry, several other specialized companies offer competitive pressure to DocuSign in areas like payments, ID verification, and contract lifecycle management. Therefore, the company is always under the gun in terms of product quality, pricing, and technology.

This is exactly what makes the stock volatile. Any miss in expectation, and investors turn to other competing companies to bet on. The Q3 results, though solid, were below expectations of the market, creating the panic sell-off situation.

Following the Q3 print, Wolfe Research analyst Alex Zukin downgraded DocuSign to Hold. Zukin does not expect shares to surge much higher in the short to medium term, and sees more downside opportunities than any upside catalyst.

eSignature Demand

The week-long ups and downs overshadowed DocuSign’s positive driving forces, which also need attention at the moment. The company’s top line is being fueled by continued customer demand for its anchor product —eSignature — which enables secure virtual signing of agreements on various devices, from anywhere in the world.

Despite this burgeoning demand, the electronic signature is a niche market that remains somewhat untapped. This gives DocuSign the first-mover edge.

The company is focused on expanding its eSignature customer base and is investing heavily in sales, marketing and technical expertise to improve its offerings.

Wall Street Weighs In

The Wall Street analyst consensus holds a fairly cautious, but optimistic stance towards the stock, with a Moderate Buy rating, based on 9 Buys, 6 Holds, and 1 Sell. The average DocuSign price target of $212.75 indicates an upside potential of 30.79%.

isclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

Trending

Name
Price
Price Change
S&P 500
Dow Jones
Nasdaq 100
Bitcoin

Popular Articles