Is DOCU Stock Poised For A Surge?
Electronic agreement company DocuSign (DOCU Stock Report) has been listed only for a little more than two years. But its shares have been on an amazing run. Since its debut in April 2018, shares of DOCU are up more than 300% to date.
The coronavirus pandemic has moved many businesses online this year. For this reason, DocuSign hit the bull’s eyes as consumers and workers are sheltering at home due to lockdown measures. But the extent of the benefit DocuSign has seen and the implications this has on the company’s future growth opportunity seems quite significant. And that appears to explain the sharp rise in DOCU stock recently.
Nasdaq 100’s Inclusion Make DOCU Stock The Cloud Stock To Watch
Shares of DOCU have been consistently on the upward trend since its first day of listing. Just this year, DOCU stock has doubled. It is well on its way to replace United Airlines on the Nasdaq 100 index. The stock reached an all-time high last week and posted its biggest gain since May 29.
The company will join cloud companies such as Adobe (ADBE Stock Report), Workday (WDAY Stock Report), and Zoom Communications (ZM Stock Report) on the index. This is reflecting a trend of rising in cloud services as companies opt for systems that can be operated without the need for their own data center infrastructure.
“Even when the Covid-19 situation is behind us, we don’t anticipate customers returning to paper or manual-based processes,” CEO Dan Springer.
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Strong Fiscal Report Highlight DocuSign’s Potential Post-Pandemic
Despite DocuSign’s reporting impressive first quarter earlier this month, the top-line revenue growth rate of 39% during the period didn’t do the company justice. That’s because the growth rate understates the company’s momentum from the rapidly changing business environment, which was boosted by the impact of the coronavirus. Deals are made online and contracts are signed digitally.
The business has grown significantly, and we can see that in the recent quarter. Customer count grew 30% year over year to 660,000. The billings, an indicator of contract dollar value increases, grew at an amazing rate of 59% to $342 million. The strong surge in demand as a result of Covid-19 could provide us some insights on how this trend will continue through the second quarter of 2020. This indication of an impressive first quarter and a potentially huge upside for the company make it one of the top cloud stocks to watch in June.
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Digital Transformation Among Businesses To Propel DocuSign’s Growth
Dominating the e-signature market is no easy feat. But the company has also set its eyes on the cloud industry. Its Agreement Cloud is a suite of more than a dozen applications that allow businesses to manage contracts, including drafting and signing. This is huge because the platform integrates with more than 350 existing systems like Salesforce, SAP, and Workday to cover an agreement process from the start till the end. The company also aims to be a leader in the business contracts segment after commanding leadership in the e-signature market.
Of course, sceptics may be concerned that the spike in demand will fade as the economy reopens. But DocuSign CFO Michael Sheridan believes that its churn rate will “remain pretty stable” because of how compelling the value propositions are for its products.
DocuSign grows its relationship with customers over time with a “land-and-expand” model. Attracting new customers with their e-signature product is easy with a self-service model. The company is betting on its users to spread the productivity benefits after trying them. I’m not certain how the economy will fare post pandemic. But one thing is for sure. That is we are going to come out of this pandemic with increased acceptance of digital tools. And as businesses begin to digitize their businesses, e-signatures and e-business contracts are likely to gain further grounds.
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The company may still not be profitable, but that’s because it is investing in its growth. Most start-up companies, if not all, are going to take some time to steer towards profitability. However, with $1billion in annual revenue, DocuSign has clearly come a long way. The acceleration of digital transformation and remote work resulting from the pandemic will provide a further boost. We believe the e-signature product has allowed the company to gain a strong foothold among users of business software’s. And that provides a good starting point for DocuSign to expand its offerings. If you are a long-term investor, would you consider adding DOCU stock to your portfolio? Comment below and let us know what you think.