DocuSign (NASDAQ:DOCU) Joining NASDAQ 100: Time to Buy?

Things are moving faster than ever in the business world. The global pandemic has completely transformed the way that many companies do business and forced the majority of them to adapt or be left behind. DocuSign (NASDAQ:DOCU) is a stock that has truly been firing on all cylinders this year. With the shift to remote work and the increased need for the company’s cutting-edge digital signature services, the cloud-based software company reported an impressive first-quarter earnings report. This has led the company to make an exciting announcement.

As of June 22^nd, DocuSign will be replacing United Airlines (NASDAQ:UAL) in the NASDAQ 100 index. This is the perfect example of two companies heading in completely opposite directions as a result of the health crisis and current economic conditions. The NASDAQ 100 is essentially a basket of the 100 largest and most actively traded U.S. companies that trade on the NASDAQ exchange. This announcement sent DocuSign shares up to 52-week highs and marks a historic milestone for the rapidly expanding business. Although the stock has been on an epic run this year, there’s still plenty of good reasons to consider buying shares at this time. Let’s take a look at why DocuSign is a buy below.

Strong Product

One of the reasons why DocuSign has been such a big winner has to do with the strength of its product suite. Its subscription-based eSignature software is bringing in record amounts of cash for the company, and Q1 revenue was up 37% year-over-year when the company reported its earnings earlier this month. If you dive deeper into how DocuSign is changing the business world, it has a lot to do with how the company is fulfilling a huge need in the market with it’s products.

DocuSign is the leading provider of e-signature services that allow companies to make deals online in a professional and legitimate way. This strong product is only part of the story, as DocuSign offers the Agreement Cloud suite which features several different applications that help businesses manage contractual work from start to finish. The Agreement Cloud is big because it can be integrated with existing enterprise systems such as SAP and Salesforce. That means DocuSign’s products are easy for companies that are looking into digital transformation to implement. It’s important to note that DocuSign’s products are sold via subscriptions, which translates to recurring revenue for the company. In fact, $280.9 million of their $297 million Q1 revenue figure was subscription-based, so its existing revenue base is not going anywhere.

Massive Shift into Digitalization

Sometimes, it pays to be at the right place at the right time. DocuSign already had a solid business model and strong growth prior to the global pandemic, but they have captured even more market share thanks to the circumstances. Suddenly, businesses are being forced to figure out a way to move their operations into the digital era, and this company is ready to help. In Q1, DocuSign accelerated its enterprise and commercial customer growth by 49% year-over-year, which signifies that even larger companies are buying into what DocuSign has to offer.

When you think about how important the ability to digitally sign agreements and draft contracts remotely is, it’s easy to understand why DocuSign has been rallying. DocuSign can help companies with onboarding new employees, making business deals, and handling contract work from start to finish without ever having to touch physical paperwork. Even hospitals are jumping onboard with DocuSign to eliminate physical signatures for incoming patients. The momentum behind digitalization is a huge positive for this stock going forward.

Sign Us Up

The truth is that DocuSign’s eSignature technology was already on its way towards becoming the new normal prior to the pandemic. The massive shift into digitalization and the work-from-home movement have only accelerated the growth of this company. With the recent news about being added to the NASDAQ 100 and so much working in its favor, DocuSign seems poised for greatness. It’s hard to imagine a scenario where businesses go back to physical contracts and paperwork and ditch DocuSign after the pandemic is under control, which is a big reason why this stock is a buy.