I’m less interested in what numbers DocuSign (NASDAQ:DOCU) will report during its earnings presentation on Mar. 11. I’m far more interested in whether the company will preview the new products it is scheduled to announce when it keynotes the Momentum 2021 conference on March 24.
DOCU stock is up over 150% in the last year. That hasn’t stopped analysts from continuing to have a bullish outlook on the stock. The 19 analysts that cover the company give DocuSign stock a 12-month price target of $270.39. That’s a gain of over 26% from the current stock price. And since the company last reported earnings in Nov., 8 analysts have upgraded their price targets to higher than the consensus estimate.
Will DocuSign Be Able to Jump Over the High Bar of Expectations?
Simply put, investors are expecting to hear good news. The company has beaten expectations in the last four quarters with an average earnings surprise of over 90%. Analysts have set a high bar for revenue. The forecast is for $406.8 million on the top line (that’s 48% year-over-year growth). During the call, analysts will want to hear that the company continues to increase its subscription revenue which is a key predictor of the company’s future growth.
On the earnings side, analysts are also setting a high bar. In this case, the forecast of 22 cents per share is an 83.3% year-over-year increase.
This is One Time You Should Embrace the New Normal
I’ve been bullish on DocuSign since before the pandemic made the company’s e-signature services an essential way of doing business. The company has a business model that simply makes sense. For a long time, complex legal transactions like buying and selling a house required lengthy in-person signing ceremonies.
For a moment, let’s put aside if there is a need for all that paperwork. What makes me bullish about DocuSign is the way and the where you sign. Whether you’re signing one or 100 documents, the pandemic has made many individuals realize you can do that from your home or office (or home office as the case may be). And that sentiment is not going away.
If you haven’t quite gotten the gist of where I’m going with this, I’ll try to make it clearer. No clear minded investor would say that e-commerce wasn’t going to be a huge part of our economy. However, since the pandemic, companies realize that their business models and supply chains are going to change forever. Consumers aren’t going to continue to use e-commerce because of a public health crisis. They will do so because it’s now part of their lifestyle.
And the same is true of the e-signature movement. Despite my apocalyptic headline. I’m actually not saying that we’ll all be living six feet apart from one another indefinitely. What I’m saying is that many individuals are realizing that if they are given an option to sign documents remotely, they’ll take that option.
Plenty of Use Cases
Millennials are entering the housing market in big numbers. This is a generation that embraces this kind of technology. That’s another example of why I believe DOCU stock still has much higher to climb. But it’s not the only one.
There are applications for DocuSign’s technology for signing insurance papers, healthcare documents, procurement contracts, and tax documents just to name a few. And the reality is that having e-signature capability is rapidly going to become the expected way for companies to do business.
DocuSign is a Buy After Earnings
Some of the recent price movement may be due to DOCU stock getting caught up in the whipsaw movement of the tech sector. The stock climbed nearly 20% for the year but is now down about 3% for the year.
However, the stock is setting up for a nice post-earnings bounce. And with the company showcasing new products later this month, coupled with the continued capitalization of the post-pandemic demand for its services, DocuSign looks like a strong buy.