Stocks are in a bear market. It has no patience for companies that reveal a weak or eroding moat.
Companies that traded on speculation of a buyout are also lower. Last week, DocuSign (DOCU) plunged
after posting a weak earnings report and issuing disappointing guidance.
In the last quarter, DocuSign posted a net GAAP loss of 14 cents. Losses tripled to $27.37 million. In
addition, the company, which supplies digital signature solutions on Adobe PDF files, increased its share-
based compensation from $81.6 million to $110 million. In Q3, the firm expects revenue of up to $604
million. Non-GAAP operating margin of 16% to 18% suggests increasing competitive pressures.
The stay-at-home lockdown and work-from-home trends ended a few quarters ago. DocuSign has none
of those tailwinds to drive business growth.
Investors should consider ADBE stock instead.
Zendesk (ZEN) fell last week when it said it completed its strategic review. It will remain an independent
company. The company received no actionable proposals when it looked for buyers last year. Poor
market conditions and tough financing conditions are to blame. The economic conditions for mergers
are absent. This suggests that ZEN stock has further downside from here. It will follow Nasdaq’s rise and
fall. Since the technology index faces strong selling pressure, investors could sell ZEN stock due to
valuation concerns.
