Looking for a stock that’s actually benefiting from the novel coronavirus? DocuSign (NASDAQ:DOCU) should be on your radar. This electronic agreement company has been on fire. Employees working from home still need to sign documents, and DocuSign’s eSignature is the leading way to do so. As a result, DocuSign stock is on fire, gaining 120% so far in 2020.
In terms of the stock market, there have been clear winners and losers as a result of the pandemic. Among the losers, you’ll find companies from sectors that have been battered, like airlines.
Now is not a great time to own shares in cruise lines. The retail sector is experiencing a string of bankruptcies.
There are also winners, such as the biotech companies that are on the hunt for a coronavirus vaccine.
Then there are the stocks for companies that have seen their products suddenly skyrocket in popularity. Zoom Video Communications (NASDAQ:ZM) is the classic example. With video conferencing taking the place of in-person meetings, Zoom has seen its stock grow in value by 254%.
DocuSign hasn’t been in the spotlight the way Zoom has. Digitally signing documents doesn’t have the same visual punch as having a dozen colleagues meeting in a video conference. But being able to digitally sign documents that will be legally binding is just as crucial to business continuity. Perhaps even more so. And DocuSign controls over 63% of the electronic signature market. So, despite being under the radar compared to Zoom, DocuSign stock has grown at the same pace.
The ‘New Normal’ Will be Good News for DocuSign
Many experts feel that the dramatic shakeup in the office work environment will continue, even when the pandemic is under control. A Stanford University study published shortly before the lockdowns noted that employees took shorter breaks, had fewer sick days and took less time off when working from home. In addition, the move saves their employers big time on rent.
Naturally, DocuSign believes that working from home is the future. In an interview with the New York Times, the company’s chief people officer said:
“Working from home is a great thing for the company and for the employees, who don’t want to get back in cars and commute for two hours. That’s lost productivity. I see it happening way more often in the future.”
Working from home may not continue to the same degree that it has during the lockdown. However, with prominent companies like Facebook (NASDAQ:FB) offering it as a permanent option, expect working from home to become the new normal for many workers.
These remote employees are not going to drive into the office every time they need to sign off on a project, expense or a contract. They’re not going to install a land line and a fax machine. They’re going to use electronic signatures. That means DocuSign is going to be selling a lot of subscriptions.
Bottom Line on DocuSign Stock
A few weeks ago, I wrote that DocuSign is a strong, A-grade buy in my Portfolio Grader. That was before the company reported its first-quarter earnings — and before DOCU had hit the triple-digit gain threshold for 2020.
Those Q1 results were even better than expected, beating Wall Street projections. Revenue of $297 million was up 39% year-over-year. Total customers increased 30% YOY to 661,000 while enterprise and commercial customers increased by 49%. Guidance shows the company is not expecting the demand to let up. It anticipates Q2 revenue of between $316 million and $320 million.
In addition, DocuSign closed its deal to buy Seal Software in May. This move brings powerful AI analytics that will allow customers to quickly search lengthy contracts and other legal documents for relevant information. It’s another big carrot for selling its DocuSign Agreement Cloud subscriptions.
There’s no question DocuSign stock has benefitted tremendously from the coronavirus pandemic. However, the company was on a strong footing before the pandemic — the resulting lockdowns merely accelerated adoption of its products.
Between the shift to working from home and its continued investment in complementary technology to fill out its enterprise offerings (like the Seal Software acquisition), DOCU is a stock that’s on a growth trajectory for the long term.
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Source: Investor Place