The Hidden Growth Lever For DocuSign?

Paper is out, and digital is in – and that’s not just because online documents are environmentally friendly. Web-based document management services deliver a long list of benefits, including faster workflow, improved version control, better security, automatic storage, easy retrieval, and reliable backups. 

A variety of companies have gotten into the digital document management space. Some are major players in the larger digital services market, while other, smaller platforms are dedicated to specific areas of the document lifecycle. 

Legally binding electronic signature collection is one of the most popular elements of digital document management, and the number of companies that offer this service – sometimes exclusively, sometimes as part of a larger package – has grown exponentially in recent years. There are more than two dozen options to choose from, each with its own set of advantages, challenges, and pricing structures. 

Examples of companies offering electronic signing solutions include the following: 

• Adobe Sign
• eSignly
• eversign
• HelloSign
• PandaDoc
• RightSignature by Citrix
• SignEasy
• SignNow
• SignRequest
• YouSign

Of course, none of these services have the experience and expertise of the original digital signature collection platform, DocuSign. 

Since its 2003 launch, DocuSign (DOCU) has refined the technology behind electronic signatures, making it possible for everyone to review and sign critical documents anytime, anywhere, and from any type of device. 

It’s true that DocuSign stock dropped precipitously in early December, losing more than 40 percent of its value in a matter of days. However, that doesn’t mean it’s time to count DocuSign stock out. Smart investors are carefully monitoring the hidden growth lever for DocuSign – a brilliant plan to disrupt a new industry and put the company back on top. 

Why Did DocuSign Stock Fall?

Though the COVID-19 pandemic crushed a lot of small businesses and depressed revenues for many large companies, certain stocks thrived under quarantine orders andfi social distancing. For example, Netflix (NFLX) saw tremendous growth, as did Amazon (AMZN), Zoom (ZM), and Peloton (PTON). 

Really, any organization that offered tools and services to support stay-at-home, work-from-home, and remote learning saw substantial growth, including DocuSign. However, those growth rates were unsustainable, and many market experts believed that the companies were overvalued at their pandemic-related heights. 

With vaccination rates up and the risk of serious disease down, people are returning to traditional classrooms and worksites. Travel is on the rise, and various forms of entertainment outside the home are making a comeback. The stay-at-home, work-from-home, and remote learning stocks are seeing price corrections, while stocks that struggled over the past two years are starting to recover. 

In November, DocuSign stock declined by roughly 11 percent for no particular reason – just the general return to normalcy after pandemic-related disruptions. However, when DocuSign released its fiscal third-quarter 2022 report for the period ending October 31, 2021, the stock all but crashed. 

The first trading day after the report was released, December 3rd, DocuSign stock dropped 40 percent. This was something of a surprise, given the fact that both revenue and earnings beat estimates. 

Revenue came in at $545.5 million, an increase of 42 percent year-over-year. That was primarily driven by increased subscription revenue, which was 44 percent higher than the previous year’s $528.6 million. Adjusted earnings per share totaled $0.58 – a year-over-year increase of 163 percent. 

Analysts have chalked the sudden sell-off of DocuSign’s stock up to the deceleration in DocuSign’s billings. Fourth-quarter guidance is well below analysts’ projections, with the company suggesting revenue of $560 million against analysts’ estimates of  $573.8 million and billings of approximately $653 million against analysts’ expected $705.4 million. 

According to CEO Dan Springer, the less-than-stellar guidance is attributed to a sudden change in consumer behavior. During the earnings call, he said, “While we had expected an eventual stepdown from the peak levels of growth achieved during the height of the pandemic, the environment shifted more quickly than we anticipated.”

Does that mean buying DocuSign is a recipe for disaster, or should investors buy DocuSign now while shares are at bargain prices? The answer is in the potential hidden growth lever for DocuSign. 

DocuSign Notary Service Could Be Disruptive

Since the dramatic drop in DocuSign’s stock price, its CEO has increased his personal holdings by more than $5 million. The question is, why does Springer have so much confidence that DocuSign shares will go up? 

It could be because people aren’t returning to paper as they return to the office. It could be because DocuSign still has a client list that is the envy of the industry, featuring names like Aetna, Apple (AAPL), Salesforce (CRM), Santander, and Visa (V). However, the likeliest reason for his confidence is the company’s plan to disrupt the notary industry with a new product: DocuSign Notary Service.

How Will DocuSign Disintermediate Notaries?

DocuSign’s original product line removed the need for in-person signatures under most circumstances, but there was a gaping hole in the company’s offerings.

Critical documents like powers of attorney, affidavits, and spousal consents required the services of a notary public. With DocuSign’s Notary Service, remote online notarization (RON) is an option in many states, bringing all the benefits of digital signatures to the notary industry. 

The notary market size was big before the pandemic, averaging 1.2 billion notarized transactions and $32 billion in revenue per year. During the pandemic, demand rose even higher, and consumers clamored for a digital solution. In July 2020, DocuSign acquired Liveoak Technologies for the express purpose of taking the notary industry online. 

It appears that DocuSign’s plan isn’t to disintermediate notaries. Instead, it will bring them into the 21st century. Notaries in states where digital services are supported can enroll in the service so their clients can skip in-person visits and sign critical documents through DocuSign’s secure digital platform. 

Will DocuSign Stock Recover?

Industry researchers project that the global e-notary market will see a compound annual growth rate (CAGR) of 21.5 percent between 2021 and 2027.

Since DocuSign already has the brand and digital signature market share to lead this emerging industry, all signs point to a bright future for DocuShare stock. 

In other words, despite the dismal events of December 2021, it is likely that DocuSign stock will recover – and perhaps reach new heights. That’s a win for shareholders who buy DocuSign stock at today’s low prices. 

How High Could DocuSign Stock Go?

It’s hard to say how high DocuSign stock could go long-term, but a majority of analysts agree that it will fully recover its December losses over the next 12 months.

Of 16 total ratings, nine analysts rated DocuSign stock a buy, and the average projected stock price is just over $212.

The most optimistic analyst in this group suggested DocuSign stock might go as high as $307 in the next 12 months. The bottom line? DocuSign stock is a buy. 

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