DocuSign stock price will be in the spotlight this week as the company publishes its quarterly financials. These numbers will come at a time when the DOCU share price was hovering near its highest level since June 2022. It has jumped by over 108% from its lowest level in 2023.
DocuSign growth has slowed
DocuSign was one of the top pandemic winners as demand for its solutions rose as most companies embraced a work-from-home approach.
Recently, however, like other big pandemic winners like PayPal and Etsy, its demand growth has slowed substantially.
DocuSign’s revenue grew to $2.76 billion in 2023 from $2.5 billion in the previous financial year. In contrast, the company grew by almost 50% during the pandemic era.
The company’s slow growth is mostly because the number of companies seeking its solutions is not rising as it did a few years.
Also, DOCU is facing substantial competition from the likes of Google, Box, Dropbox, PandaDoc, and Adobe. All these firms have solutions that let users sign documents easily.
Additionally, while DocuSign has expanded its offerings, it is primarily a one-product company. This is much different from other Software-as-a-Service firms like Salesforce and Adobe that are able to upsell products to existing customers.
Therefore, a key hope among investors is that DocuSign could become an attractive acquisition target. Just recently, Blackstone and Vista Equity acquired Smartsheet in a $8.4 billion deal. This was a notable buyout since Smartsheet is also a one-product SaaS company.
DOCU earnings ahead
The next key catalysts for the DocuSign stock price will be its earnings. The most recent financial results showed that DOCU’s revenues rose by 7% in the last quarter to $736 million. This growth happened as the number of users in its platform jumped to 1.6 million. These users are from companies like Salesforce, Boston Scientific, Allianz, United, and SAP.
Analysts expect that DocuSign’s business continued to do well in the third quarter. The revenue estimate is $745 million, a 6.4% increase from the $700 million it made in the same quarter last year.
Analysts also expect that its annual revenue will be $2.95 billion, a 6.7% YoY increase. Its 2025 revenue is expected to be $3.12 billion, a 5.86% increase from this year. DocuSign has a long record of beating analysts’ estimates, meaning that its business is doing better.
DocuSign has also become a highly profitable company as its earnings per share are expected to hit $3.49 this year and $3.7 next year. This growth has helped the management to reduce the number of outstanding shares to 202 million, down from 205 million last year.
The other benefit, which may make DOCU an acquisition target is that it is fairly undervalued. It has a forward P/E ratio of 16.48, much lower than the sector median of 30.75.
For a SaaS company like DocuSign, the Rule of 40 is one of the best approaches to value it. In this case, the company has a forward revenue growth of about 7.45% and a net income margin of 34.56, giving it a value of 42, meaning that it is quite cheap.
DocuSign stock price analysis
DOCU chart by TradingView
The weekly chart shows that the DOCU share price has been in a rebound in the past few months. This rebound happened after the stock formed a rising triangle chart pattern, which is a popular bullish sign in the market.
DocuSign has now moved above the 50-week and 25-week moving averages. It is also attempting to retest the 23.6% Fibonacci Retracement point at $102.8. The Relative Strength Index (RSI) and the MACD have continued rising.
Therefore, there are odds that the DocuSign stock price will continue rising as bulls target the 50% retracement point at $143, up by 125% above the current level.
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