DocuSign stock price analysis: buy or sell ahead of earnings?

on Jun 4, 2024
  • DocuSign has become a big fallen angel after surging during the pandemic.
  • The company will publish its financial results on Thursday this week.
  • The focus will be on the company’s revenue growth and artificial intelligence.

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DocuSign (NASDAQ: DOCU) stock price has struggled this year as hopes that it will be acquired faded. It has dropped by almost 8% in 2024, underperforming other technology companies like Nutanix, Box, and Dropbox. It remains about 83% below its all-time high.

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DocuSign earning ahead

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DocuSign was one of the biggest beneficiaries of the Covid-19 pandemic. At the time, the stock soared to a record high of $315 while its total market cap jumped to over $64 billion. This happened as more companies embraced online working.

Like Zoom Video, however, the company has struggled in the post-pandemic era as more people have moved back to the office. While digital signatures are still relevant, the company has struggled as the growth trajectory faded.

Still, the company has done modestly well in the past few years. Its total revenue soared to overr $2.76 billion in the last financial year from $2.5 billion a year earlier. Most importantly, it moved from a loss-making zone to a profit.

As a result, DocuSign has attracted some potential suitors in the past few months. A report by Reuters showed that Bain Capital and Hellman & Friedman were vying to acquire the company in January. It is unclear whether the two private equity companies are still interested in the company.

Still, there is a likelihood that the company will be acquired as the number of software deals has jumped. Thoma Bravo has acquired DarkTrace while Salesforce is said to be targeting Informatica. Synopsys acquired Ansys a few months ago.

The next important catalyst for the DocuSign stock price will be its earnings that are scheduled for Thursday. In its most recent earnings, the company said that its total revenue rose by 8% to $712 million as its billings jumped by 13% to $883 million. 

DocuSign expects that its revenue will be between $704 million and $708 million as its operating margins will be between 27% and 285. Analysts expect that its revenue will come in at $707 million while its annual guidance will be $2.93 billion.

The other catalyst for the DOCU stock will be its positioning in the artificial intelligence (AI) industry. Most recently, the company completed the acquisition of Lexion to accelerate its AI features.

DocuSign’s top challenge is that the company is still overvalued despite the recent crash. With a revenue growth of 8% and operating margin of 28, the company has a rule of 40 figure of 36, which is lower than the 40 level. 

DocuSign stock price analysis

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DocuSign stock

DOCU chart by TradingView

The daily chart shows that the DOCU share price has moved sideways in the past few months. In this period, it has remained below the descending trendline shown in black. The stock has also moved below the 50-day and 25-day Exponential Moving Averages (EMA).

Also, the two lines of the MACD indicator have moved below the neutral point while the Relative Strength Index (RSI) drifted downward. Therefore, the stock will likely have a bearish breakout as sellers target the lower side of the channel at $40.

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