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Here's Why Investors Should Ignore Short-Term Price Swings and Buy DocuSign

By Danny Vena - Dec 5, 2020 at 6:43PM

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Investors with an appropriate time horizon shouldn't be worried about the digital signature specialist's wild price swings. Here's why.

Given the shift to remote work during the pandemic, products that helped facilitate distance work have thrived. Because of its industry-leading e-signature platform, DocuSign ( DOCU -3.67% ) was just such a company. However, in the recent rotation out of stay-at-home and remote work stocks, DocuSign stock took it on the chin, losing more than a quarter of its value.

On this episode of Fool Live that aired on Nov. 9, "The Wrap" host Jason Hall and contributor Danny Vena discuss the short-term price swings that have plagued DocuSign stock in recent weeks, and why these movements won't matter over the longer term.

Jason Hall: Danny Vena, I'm going to let you start with one right here at the top. Oasis9 asking about DocuSign. Stock dropped today and it's by far the one that most folks will want to know. So Danny Vena, you want to tell us what's going on there?

Danny Vena: Absolutely. If you look broadly across the market, what you've seen is that the whole basket of stay-at-home stocks really just suffered today. E-commerce, cloud computing, streaming video, telehealth, digital payments are all down. The reason that they are down is because, if we get a safe vaccine for the coronavirus, people will be able to get out of their house and they'll be able to go do things, and so we won't be looking so much at stay-at-home as the only winner in the market.

But I want to go specifically look at DocuSign, and if you give me just a second here, I'm going to share, because I think this really paints a picture. This is the year-to-date stock chart for DocuSign, and if you look over here on the right-hand side, $197.60 close of market today. That means that even after it plummeted 15 percent today, the stock is still up 167 percent year-to-date.

I think what investors we're seeing today was they're seeing a little bit of a rotation. Folks were selling some of their winners so they can buy what they perceive to be the next group of winners. I did not find any company specific DocuSign news, so I think it's just part of what we saw throughout the entire market today.

Jason Hall: I think the bigger picture too is that DocuSign remains a wonderful business, right? It's still a tremendous business. The applications for it's products are broad. They're convenient, they're secure. There are so many things that make it powerful, in a way it's like, not the same as Teladoc ( TDOC 3.83% ), but it's the same idea. It's something that enables more, and it's not just about people not wanting to be in the same room with one another.

Danny Vena: First of all, DocuSign already has about 70 percent of the digital signature market so they're a real player there, but that market is growing right now. In addition to that, DocuSign has developed a product called the digital agreement cloud, and that will manage the entire life cycle of agreements. They're expanding beyond just the e-signature market. I think folks, if you are an investor in DocuSign today, I don't see anything that would change that, I'm a DocuSign investor, and I don't see anything bad about what we're seeing today other than just a mild price correction.

Jason Hall: Thank you. Thank you for that, Danny. DocuSign ticker, D-O-C-U.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

DocuSign Stock Quote
$138.60 (-3.67%) $-5.28
Teladoc Health, Inc. Stock Quote
Teladoc Health, Inc.
$98.41 (3.83%) $3.63

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