DocuSign Stock is Getting Cheap Here

Digital signature cloud company DocuSign NASDAQ: DOCU stock has collapsed after peaking at $314.76 plunging to the low $132s before attempting a bounce. The pandemic winner has taken investors for a dangerous ride despite improving fundamentals as reality sets into the markets. COVID-19 enabled DocuSign to see a surge of business as people needed a virtual way of signing contracts, agreements, and letters. The Company implements a subscription model and provides expanded services beyond e-signatures. DocuSign stated that nearly two-thirds of its customers started using e-signatures within the two years. It has more than 1.1 million customers including over 159,000 enterprise customers, representing a 34% growth rate as of Oct. 31, 2021. Its services are intended to gain from trends in enterprise digitization, remote workflows, automation, and paperless documentation. Prudent investors looking for exposure can watch for opportunistic pullbacks in shares of DocuSign.

Fiscal Q3 2021 Earnings Release

On Dec. 2, 2021, DocuSign released its fiscal third-quarter 2021 results for the quarter ended October 2021. The Company reported an earnings-per-share (EPS) profit of $0.58 versus $0.46 consensus analyst estimates, a $0.12 beat. Revenues grew 42.4% year-over-year (YoY) to $545.46 million, beating analyst estimates for $531.25 million. Subscription revenues rose 44% YoY to $528.60 million. Professional services and other revenues grew 4% YoY to 16.9 million. Billings rose 28% YoY to $565.2 million. The Company ended the quarter with $908.20 million in cash and cash equivalents. DocuSign CEO Dan Springer commented, “Third quarter revenue growth of 42% year-over-year and operating margin of 22% exceeded our expectations. After six quarters of accelerated growth, we saw customers return to more normalized buying patterns, resulting in 28% year-over-year billings growth. With a $50 billion TAM and 1.11 million customers worldwide, we are confident in the value DocuSign delivers in an increasingly digital anywhere economy."

Downside fiscal Q4 2021 Guidance 

DocuSign raised fiscal Q4 2021 revenues to come in between $557 million to $563 million versus $573.89 million consensus analyst estimates. Subscription revenues are expected between $544 million to $550 million. Billings are expected between $647 million to $659 million with gross margins expected between 81% to 82% and non-GAAP margins between 17% to 19%.

Conference Call Takeaways

CEO Springer set the tone, “Last month, we enhanced DocuSign Notary, so administrators can manage the availability of first-party notaries, one more reason we believe that DocuSign Notary will become the tool of choice for real estate, insurance, and other financial service providers. A number of financial institutions, including Fidelity, added the service in Q3, but M&T Bank is my personal favorite early success story in the space. M&T Bank has been a customer since 2018, but their DocuSign use cases jumped from about 50 to more than 200, first with the introduction of ID verification and now with a notary. That’s an obvious win for us, but the win for M&T Bank is they can now remotely notarize documents in less than 7 minutes. The combination of eSignature, Identity Verification, and Notary are game-changers for M&T’s 700 retail branches, and we’re hearing that it’s making a notable impact on their operating costs as well as a huge plus for their customer experience. Speaking of ID Verification, or IDV for short, last month, we also launched an enhancement that lets customers add SMS reauthentication to IDV envelopes. So, after signers pass an initial IDV, they enter a passcode delivered via SMS text to access the envelope, adding an extra layer of security that our customers value, along with added convenience to our customers’ customers. We’ve also made a number of important enhancements to our DocuSign CLM product this quarter, helping organizations automate manual business processes and improve efficiency with every agreement. Just this month, we launched a full set of collaboration tools within the product to give users the ability to comment, tag others and assign tasks all in the CLM UI. On top of those innovations, we continue to make significant enhancements across the entire Agreement Cloud, including new Agreement Actions with Google and Microsoft apps to automate the post-signature tasks; new Delegated Signing capabilities for our enterprise customers; and new tech to simplify invoicing using our popular product, DocuSign Gen for Salesforce Billing. There’s plenty more ahead to extend our leadership position and guide our customers into the next generation of agreements as our steady drumbeat of innovation continues to set us apart. We are making significant investments in both product and platform innovation as we believe it drives customer success and positions us well for durable growth going forward.”

DOCU Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for DOCU stock. The weekly rifle chart attempted a bottom at the $132.26 Fibonacci (fib) level. The weekly rifle chart downtrend has a falling 5-period moving average (MA) at $149.14 followed by the lagging 15-period MA at $217.35. The weekly stochastic has fallen to the 10-band with weekly lower Bollinger Bands (BBs) at $79.54. The weekly market structure low (MSL) buy triggers above the $163.77 level. The daily rifle chart breakdown has a falling 5-period MA at $147.05 followed by the 15-period MA at $151.51. The daily BBs are starting to expand after the compression. The daily lower BBs sit at $134.64 as it expands lower. The daily stochastic is falling below the 40-band. Prudent investors can watch for opportunistic pullback levels at $122.41 fib, $117.85 fib, $107.74 fib, $97.63 fib, $84.30 fib, $75.88 fib, and the $63.95 fib level. Upside trajectories range from the $173.74 fib level up to the $217.00 fib level.