DocuSign: the demand for digital verification will not disappear
DocuSign shares are trading 25% below their highs, due to capital outflows from the technology sector. The company gained the popularity of investors even before the pandemic, while in 2020 its securities rose almost three times in price. DocuSign can be easily compared with the strongest representatives of the industry, such as Salesforce and Workday. Despite the fact that the annual revenue reached $1.5 billion, the growth rate is kept at a high level-about 30% per year.
At the end of the fourth quarter of 2020, revenue increased by 57% y/y, to $430.9 million, while Wall Street expected $407 million. For comparison, in the third quarter of 2020, the indicator increased by 53% y/y. As a potential risk, we can note a lower rate of increase in the size of invoices issued ("billings" - gives an understanding of the company's revenue in the long term): in the last three months of 2020, it was “only " 46%.
In 2021, management expects revenue growth of 35-36% – $1.863-1.973 billion. Given the figures for "billings", the final result may be much higher. And it is worth remembering that the number of customers last year increased by 51%, to 892 thousand. Even in the fourth quarter, when effective vaccines against COVID-19 appeared, 70 thousand new users were attracted. We also note positive changes in the operating margin: 17% in the fourth quarter compared to 8% a year earlier.
The main risk is the emergence of new competitors, such as Box Sign, which are able to attract some of the attention of users, which will negatively affect the growth rate of DocuSign.