DocuSign (NASDAQ:DOCU) reports earnings this week, and I wouldn't blame investors for being jittery.
This is a growth stock that has taken a beating in previous earnings reports. In December, the stock
plummeted more than 40% despite beating expectations as investors were concerned about the
guidance for the business, and whether there was enough demand for its services in a post-pandemic
world. Needing to sign signatures digitally may be an added convenience, but a big growth opportunity?
Perhaps not so much.
And when the company reported its Q1 earnings in June, its shares crashed 25% as adjusted per-share
profit of $0.38 came in below the $0.46 analysts were expecting from the business. DocuSign beating on
revenue simply wasn't enough to save the stock from another sharp selloff.
Within the past year, DocuSign's stock has fallen 78% (the S&P 500 , by comparison, is down just 12%
over that time frame). What's concerning is that DocuSign remains at a high valuation with its price-to-
book multiple at more than 33 and the stock trading at 36 times future profits.
At less than $55 to close out last week, the tech stock is now trading at where it was before the
pandemic. I'm optimistic that at such a low price point, the stock could be a worthwhile pickup for long-
term investors. However, at the same time, the markets have punished underperforming stocks, and it
wouldn't be surprising for DocuSign to continue to fall given the challenging conditions in the economy
right now.
Overall, this isn't a stock worth gambling on as things could get worse before they get better for
DocuSign.
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