Why Docusign gained over 28% today

Shares of documentation (NASDAQ:DOCU) rose around 28.7% as of 1:13 p.m. ET on Friday.

The company reported third-quarter results last night that beat analysts’ estimates and forecast a stronger-than-expected full year. Meanwhile, the underlying metrics also showed a positive picture.

Miss the morning report? Wake up with Breakfast News in your inbox every market day. Register for free »

In the third quarter, Docusign reported 8% revenue growth to $754.8 million and non-GAAP (adjusted) earnings per share of $0.90, with both figures comfortably beating analysts’ expectations. Additionally, the company delivered strong guidance, particularly around billings, which are in investors’ focus. Management forecast billings to increase to $870 million to $880 million in the fourth quarter, an acceleration from $752.3 million in the third quarter.

The billing takes into account all contract sales to new customers as well as extensions for existing customers within the contract term. Many analysts therefore focus on this metric rather than the revenue recorded over the course of the contract term.

Even though Docusign has tripled from its all-time lows, the stock is still over 70% below its all-time high set in 2021, so there could well be further upside potential.

But while investors are currently quite enthusiastic, the shares now appear expensive. Docusign’s market cap is now $21.8 billion, more than seven times this year’s billing forecast. While that’s not particularly expensive for a high-growth software name, Docusign is still only growing in the mid-to-high single digits. So I would be cautious about chasing this big rally, but kudos to investors who believed in the turnaround when new CEO Allan Thygesen took over in October 2022.

Have you ever felt like you missed the boat when it came to buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts will provide one “Double Down” shaft Recommendation for companies that they think are about to collapse. If you’re worried you’ve already missed your investment opportunity, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: If you had invested $1,000 when we doubled in 2009, You would have $376,143!*

• Apple: If you had invested $1,000 when we doubled in 2008, You would have $46,028!*

• Netflix: If you had invested $1,000 when we doubled in 2004, You would have $494,999!*

Right now we’re issuing “Double Down” warnings for three incredible companies, and such an opportunity may not happen again in the near future.

The story continues