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Why did DocuSign plunge 11% two days after setting record?

Despite hitting an all-time high price a day before its Q2 report, Thursday’s US tech sell-off quickly corrected DocuSign’s early-week gains.

Why did DocuSign stock plunge 11% on Friday?

US electronic signature solutions company DocuSign saw its shares close 11% lower last Friday 04 September 2020, just two days after hitting an all-time high price of US$290.

The surprising decline had coincided with last week’s US tech stock sell-off, which took down FAANG (Facebook, Amazon, Apple, Netflix, Google) by roughly 6.5% on average.

DocuSign’s stock price correction also took place despite the company posting better-than-expected second quarter results for fiscal 2021.

Shares ended the week at US$216 a share on the IG platform.

What’s the DocuSign stock and earnings forecast?

DocuSign’s revenue for the second quarter exceeded Wall Street estimates (US$318.6 million) by 8%, while earnings per share (US$0.17) also surpassed analyst expectations (US$0.08) by a whopping 100%.

These impressive results – largely predicated on people not being able to meet face to face due to Covid-19 – have also prompted company CEO Dan Springer to state that ‘the need to agree electronically and remotely has never been stronger’.

‘We are just scratching the surface of our Agreement Cloud opportunity and believe we are increasingly becoming an essential cloud-software platform for organisations of all sizes,’ he added.

In terms of its share price performance, Springer said that the company was ‘somewhat surprised’ to see its stock rally over 30% in the lead up to its earnings announcement, only to ‘give it all back’ right after, he told Yahoo Finance.

Nevertheless, he noted that ‘the momentum in the stock is strong’ as agreed by analysts – thanks to its 45% revenue growth. He concluded by saying that he ‘tries not to get too focused on short-term fluctuations’.

DocuSign has received a consensus rating of ‘overweight’ from 18 analysts, alongside an average target share price of US$250.26, according to MarketWatch.

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Highlights from DocuSign’s Q2 results

Here are some things that stood out in the e-signature and cloud agreement solution’s second quarter results for the three months ended 31 July 2020:

  • Total revenue was US$342.2 million, an increase of 45% year-over-year. Subscription revenue was US$323.6 million, up 47% year-over-year. Professional services and other revenue was $18.6 million, up 25% year-over-year.
  • GAAP (standard accounting) gross margin was 74% in both comparative periods. Non-GAAP (adjusted) gross margin was 78% in both comparative periods.
  • GAAP (standard accounting) net loss per basic and diluted share was US$0.35 on 185 million shares outstanding compared to US$0.39 on 175 million shares outstanding in the same period last year.
  • Non-GAAP (unadjusted) net income per diluted share was US$0.17 on 203 million shares outstanding compared to US$0.01 on 189 million shares outstanding in Q2 2020.
  • Net cash provided by operating activities was US$118.1 million compared to US$26.4 million a year ago.
  • Free cash flow was US$99.8 million compared to US$11.9 million a year ago.
  • Cash, cash equivalents, restricted cash and investments were US$740.6 million at the end of the quarter.

How to trade US stocks with IG

Are you feeling bullish or bearish on DocuSign and other US stocks?

Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <DocuSign Inc> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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