The stock market post-covid crash is ruthless. When DocuSign posted slowing growth, investors sent DOCU sign down by 20% on March 11 to $75. Its glory days during the pandemic-driven lockdown are over.
DocuSign has two fundamental problems. First, Adobe’s (ADBE) free PDF reader supports e-signing. Second, its electronic signature offering lacks a moat. Competitors supply similar technologies at a fraction of DocuSign’s price.
In the fourth quarter, the company posted non-GAAP earnings per share of 48 cents. Revenue grew by 34.8% Y/Y to $580.8 million. For Q1/2022, DocuSign expects revenue of $579M-583M. Non-GAAP gross margin will be 79% to 81%. For 2022, Total revenue is in the range of $2.47B-$2.482B.
DOCU stock’s rise from $80 to $315 and down to $75 is a result of the irrational stock market during the pandemic. At the time, SaaS companies benefited from several quarters of orders stuffed in that period. Now, corporations are bringing staff back to work. The hybrid work environment will slow the need for SaaS solutions.
Twilio (TWLO), a communications supplier, fell in sympathy. The stock is one of many SaaS that risks falling further as Nasdaq’s correction intensifies. Long-term growth investors may not time the entry point for stocks like TWLO and DOCU. Pick a suitable P/E and P/S. When the stock falls to that level, start a position in them.