Docusign Stock Rises 20% in a Month: Should You Hold or Fold?

DocuSign, Inc. DOCU has experienced a remarkable 20.3% increase in its stock price over the past month, outpacing the broader industry’s 6.7% growth.Image Source: Zacks Investment ResearchAt the latest trading session, DOCU shares closed at $83, nearing their 52-week high of $83.68. The stock is also trading above its 50-day moving average, reflecting strong bullish sentiment among investors.Image Source: Zacks Investment ResearchWhile this momentum may entice potential buyers, is now the right time to invest in DOCU? Let’s explore further.Docusign's Growth Fueled by DemandDocusign’s top line is significantly benefiting from continued customer demand for eSignature in a large addressable market. DOCU’s customer base has grown steadily, with 1.1 million in fiscal 2022, 1.3 million in fiscal 2023, and 1.5 million in fiscal 2024. Taking the trend into consideration, we can expect this growth to be sustained in the coming years as well. Despite this rising demand, the market for eSignature remains largely untapped. Therefore, Docusign has ample opportunities to expand eSignature across businesses globally, which will boost its revenues.Docusign’s subscription fees account for 97% of the total revenues. DOCU’s subscription fees include the use of its products and access to customer support, and the subscriptions generally range from one to three years. A subscription model is very useful for software developers because it stabilizes revenue streams and improves the visibility of cash flows. It also makes expensive software more easily affordable and accessible to companies with limitations on resources, thus expanding the market.DOCU’s direct and indirect go-to-market initiatives also facilitated growth for commercial and enterprise customers. Numerous customer programs and initiatives have gradually increased subscription revenue growth over time. In fiscal 2024, subscription revenues increased 10%, primarily due to the expansion of revenues from existing customers and new customer additions.Docusign’s international revenues have increased consistently over the past three years. Its international revenues represented 23%, 25% and 26% of total revenues in 2022, 2023 and 2024, respectively. DOCU started its international selling efforts in Canada, the U.K., and Australia, where it can leverage its core technologies due to similar approaches to e-signature in these countries and the United States. The company has experienced a rise in demand across multiple geographies and is directing its sales and marketing efforts to tap this potential.Docusign has deepened its relationships with tech giants such as Salesforce CRM and Microsoft MSFT. For instance, the company has expanded its global strategic partnership with Salesforce. Docusign and Salesforce jointly develop solutions for the automation of the contract creation process and expansion of collaboration among organizations that use Salesforce’s Slack. Docusign made an eSignature integration with Microsoft Teams last year and is currently an official electronic signature provider in Microsoft Teams’ Approvals app. These partnerships enable the company to sell into a far greater number of accounts than it could have done alone.DOCU Has Healthy Returns on EquityReturn on equity (ROE), an indicator of profitability, shows how efficiently a company uses its shareholders' investments to generate earnings. DOCU’s trailing 12-month ROE is 53.7% compared with the industry’s 31.8%.Image Source: Zacks Investment ResearchStrong Top and Bottom-Line ProspectsThe Zacks Consensus Estimate for DOCU’s fiscal 2025 earnings is pegged at $3.45, indicating 15.8% growth from the year-ago level. Earnings in fiscal 2026 are expected to increase 6% from the year-ago actuals. The company’s sales are expected to rise 6.5% and 6% year over year, respectively, in fiscal 2025 and 2026.One estimate for fiscal 2025 moved north in the past 60 days versus no southward revisions. The Zacks Consensus Estimate for fiscal 2025 earnings has moved up 0.6% in the past 60 days.Consider Waiting for a Better Entry PointDocuSign has delivered remarkable stock performance, fueled by robust demand for eSignature solutions, a growing customer base, and strategic alliances with Salesforce and Microsoft, highlighting its growth potential. Its subscription-driven revenue model and international expansion further bolster its financial stability. However, with the stock approaching its 52-week high and trading above its 50-day moving average, a potential correction may be on the horizon. While its long-term fundamentals remain strong, investors should consider the limited short-term upside. Thus, we recommend holding DOCU shares and monitoring for a better entry point.DOCU currently sports a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microsoft Corporation (MSFT): Free Stock Analysis Report Salesforce Inc. (CRM): Free Stock Analysis Report Docusign Inc. (DOCU): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks