DocuSign’s [DOCU] share price gained 194% in 2020, with most of the increase coming after the beginning of April. The cause isn’t hard to work out — the tech company, which helps businesses sign documents online, saw an uptick in users as office workers began working from home en masse due to the coronavirus pandemic.
Those who bought shares in DocuSign at the start of January 2020 would have paid circa $70. As of 19 January 2021’s close, DocuSign’s share price is over $250.
So, are there any gains left in 2021 or is DocuSign’s share price due a pullback?
How is DocuSign’s share price performing?
So far in 2021, DocuSign’s share price has managed to keep its upward momentum and is up around 15.36% year to date. The stock is also trading above both its 50-day and 200-day moving average. That said, with vaccines being rolled out globally, there is an expectation that many office workers will return to the office.
Is DocuSign’s share price justified? Well, revenues have been increasing, with DocuSign seeing total revenue come in at $382.9m in the third quarter, a 53% year-over-year increase. The bulk of that was from subscription revenue, which saw a 54% bump to $366.6m. Losses were also down, with a GAAP net loss per basic and diluted share of $0.31, compared to $0 26 the previous year. However, the stock trades at a 223.44 forward price to earnings ratio.
DocuSign secures additional funding
As revenues surge and losses are cut back, DocuSign has managed to secure additional funding. On 11 January, the company said it had secured a $500m revolving credit facility over the next five years, with the option for an additional $250m subject to terms. This allows DocuSign to withdraw money when it needs to, without having to reapply for a loan.
"This transaction provides us with more flexibility on our balance sheet to deliver on our growth agenda. We are taking advantage of the favorable market environment to optimize our capital structure and strengthen our balance sheet," said Cynthia Gaylor, DocuSign’s CFO, in a press release.
"We are taking advantage of the favorable market environment to optimize our capital structure and strengthen our balance sheet" - Cynthia Galor, DocuSign CFO
Two days later DocuSign announced that it was offering convertible senior notes, which won’t pay interest. The $600m offering is due by 2024 and will allow investors to convert them into cash on 15 October 2023, shares or a combination of the two. According to Market Share, the initial conversion rate would be $420.24 a share, a 63.8% upside on the current share price (through 19 January’s close).
DocuSign estimates that this would bring in approximately $588.9m in net proceeds, with plans to use the bulk of this in repurchasing 0.5% Convertible Senior Notes due 2023.
What do the analysts think?
Wall Street is also seemingly behind the curve on DocuSign. In the past four quarters the company has easily topped analysts’ expectations, with a huge beat in the latest Q3 results — delivering earnings of $0.22 per share against an expected $0.13 loss per share.
For the current quarter, analysts are expecting DocuSign to post earnings of $0.22 a share, up from the $0.12 seen in the same period last year. Revenue is also expected to increase 48.3% to $407.65m. This is on the top end of DocuSign’s own revenue guidance of $404m to $408m.
From the analysts tracking the stock on Yahoo Finance, Docusign has an average $279.45 12-month price target, which would see an 8.9% upside if hit. The most bullish price target on the site is $325, with the most bearish being $230.
Among the bulls is Piper Sandler analyst Rob Owens, who upgraded his rating on the stock from neutral to overweight at the start of January. Owens cited that demand for e-signature products should remain “sticky coming out of the pandemic,” as reported by The Fly. Owens upped his price target on DocuSign from $225 to £300.
JPMorgan’s Sterling Auty is more bearish, having downgraded DocuSign from overweight to neutral, although Auty kept his $271 price target. The analyst cautioned investors on working from home stocks with high multiples that could underperform if the economy expands in 2021 — something investors should bear in mind before signing onto DocuSign’s current share price.
|Operating margin (TTM)||-14.75%|
|Quarterly revenue growth (YoY)||53.50%|
DocuSign's share price vitals, Yahoo Finance, 20 January 2021