DocuSign Inc. (DOCU) has seen soaring growth over the past year and significantly outperformed the S&P 500. The electronic signature technology company’s stock rose by approximately 289.6% as of July 9, 2021, compared to the S&P 500’s gain of about 33.7% since the start of 2020. Despite this growth, hedge funds were selling, and DocuSign lost traction on the WhaleWisdom Index, landing at 33 after a previous ranking of 14.
Demand for DocuSign’s subscription services has understandably increased during the coronavirus pandemic due to the need to stay connected during remote telework. DocuSign offers companies a method for remote preparation and sharing contracts and other agreements while electronically recording e-Signatures and approval notes. In particular, the company’s flagship e-signature product saw a boom in popularity from remote work during the pandemic. Even with vaccination rollouts and many pandemic restrictions lifted, DocuSign continues to see momentum for its services. Many businesses move to a hybrid workforce with a portion of remote work remaining.
Hedge Funds Are Selling
DocuSign has temporarily lost favor with hedge fund managers and institutions. Looking at activity by the top hedge funds in the first quarter of 2021, the aggregate 13F shares held declined to about 40.0 million from 40.7 million, decreasing approximately 1.9%. Of the hedge funds, 33 created new positions, 82 added to an existing position, 41 exited, and 67 reduced their stakes. Aggregate holdings by institutions experienced a slight decrease of about 0.1% to approximately 139.5 million from 139.6 million.
Encouraging Multi-year Estimates
Analysts expect to see earnings rise in the next two years, bringing earnings to approximately $2.17 by January 2023. Revenue estimates are also favorable, with a year-over-year forecast showing revenue rising from $2.1 billion by 2022 and $2.6 by 2023.
Analysts Are Optimistic
Analysts shared optimistic outlooks after the first-quarter results were released. William Blair & Co. anticipates a strong year for DocuSign. Oppenheimer & Co., Inc. shared that DocuSign is “strategic technology for the new digital future of work” and maintained an Overweight rating on the stock while lowering their price target to $260 from $300 due to industry compression. Morgan Stanley recognized the continuing forward momentum for DocuSign, which was not simply a one-time benefit from the coronavirus pandemic. Morgan Stanley maintained an Overweight rating on the stock and gave it a price target of $295.
DocuSign’s future looks promising as the company continues to run with the boost in momentum garnered during the pandemic. Hedge funds may have recently decreased holdings, but optimistic estimates from analysts should be encouraging to investors.