2. DocuSign, Inc. (NASDAQ:DOCU)
Fisher Asset Management’s Stake Value: $464,854,000
Number of Hedge Fund Holders: 51
DocuSign, Inc. (NASDAQ:DOCU) is a California-based company offering electronic signatures and digital transaction management software and services. Ken Fisher purchased over 3 million DocuSign, Inc. (NASDAQ:DOCU) shares, worth $464.85 million, representing 0.26% of the billionaire’s 13F investments for Q4 2021.
DocuSign, Inc. (NASDAQ:DOCU) published its earnings for the quarter ending October on December 2, posting an EPS of $0.58, beating estimates by $0.12. Revenue over the period jumped 42.45% year-over-year to $545.46 million, surpassing estimates by $14.22 million.
On January 6, Piper Sandler analyst Rob Owens lowered the price target on DocuSign, Inc. (NASDAQ:DOCU) to $175 from $200 and kept a Neutral rating on the shares. Many of the demand drivers that positively impacted cybersecurity spending in 2021 remain in play as we enter 2022, the analyst told investors in a research note.
According to the third quarter database of Insider Monkey, 51 hedge funds were long DocuSign, Inc. (NASDAQ:DOCU), with stakes totaling $4.2 billion, as compared to 58 funds in the quarter earlier, holding stakes in DocuSign, Inc. (NASDAQ:DOCU) worth $4.6 billion. Tiger Global Management is the largest DocuSign, Inc. (NASDAQ:DOCU) stakeholder as of Q3 2021, with 7.30 million shares, valued at $1.88 billion.
Here is what Rowan Street Capital has to say about DocuSign, Inc. (NASDAQ:DOCU) in its Q4 2021 investor letter:
“DocuSign (DOCU)
Finished 2018 with $701 million in revenues; in 2021 they are expected to make $2.1 billion (that’s 3x in just 3 years)
477,000 paying customers at the end of 2018 grew to 1.1 million
Customers spending more than $300k per year increased from 310 to 785 (2.5x growth).
Docusign stock tumbled 42% after it reported in Q3 earnings in the beginning of December, in which it delivered a disappointing Billings outlook as CEO Dan Springer called out a “return to more normalized buying patterns following a stretch of “accelerated growth.” The company was viewed as a hot pandemic play, but recently the market sentiment has shifted to “the slowdown is as a sign a company might have grown too quickly as investors crowded into trades that worked.“
As you can see from the graph below, Docusign stock was trading at ‘peak optimism’ price-to-sales ratio of 35x in the summer of 2020 and has now corrected to a much more reasonable 13x (or 10x expected 2022 sales). Thankfully, our position was insignificant before this correction, and we have been taking advantage of this significant decline in the stock price to build a much larger position, as we expect it to deliver double-digit returns from these price levels over the next 3-5+ years.
Our rationale is simple: despite the recent decline in the valuation, it’s clear that Docusign is still in the early days of its $50 billion Agreement Cloud opportunity as digital transformation remains a high priority for organizations worldwide (our fund is a very happy user of their services). DocuSign is uniquely positioned to lead and capture eSignature and the broader Agreement Cloud market opportunity, given their strong brand leading market position (Docusign has now become a verb) and product differentiation. Even as the pandemic subsides and people begin to return to the office, they are not returning to paper. eSignature and the broader Agreement Cloud are clearly here to stay, and DocuSign’s value proposition will persist no matter how the future of work unfolds.
The huge drop in company stock also triggered the company CEO, Dan Springer to purchase approximately $10 million worth of DOCU stock in the open market. This is the first insider purchase at the company since it went public in April 2018 at $29, and it’s the vote of confidence that we love to see!”
