Insider And Institutions Put A Bottom In Docusign
Shares of DocuSign (NASDAQ: DOCU) have been in a correction for several quarters due to slowing growth and it hit a new low in the wake of the FQ4 results. The good news is that a bottom is now in play due to an uptick in insider and institutional activity. Most notably, company CEO David D. Springer made his 2nd purchase in 3 months as the stock hits it’s new low and it was no small purchase. Mr. Springer put just over $5 million of his own dollars into the market bringing his total purchases up to nearly $10 million since late December 2021. You may say, but the other execs have been selling and that is true. The mitigating factor here is that insider selling is consistent with share-based compensation and expiring lockups so not the red flag it could be.
In regards to the institutions, they have been a little more aggressive with their purchases having netted shares for the last 3 quarters. Total institutional buying in that time is worth about 14% of the market cap with shares trading near $96 and a large portion of that buying was done in the first quarter of 2022 and picked up in the wake of the earnings report. Total Q1 purchases amount to about 6.9% of the market cap and that figure is still on the rise.
The analysts are where the risk lay, at least for now. The analysts rate the stock a firm Hold leaning to weak Buy but there is a notable downtrend in sentiment. At least 11 of the 17 analysts with current ratings came out with price target reductions and downgrades and this trend may continue. Among the 11 are 9 price target reductions and 2 downgrades that have the Pricetargets.com consensus target at $171.25. This is still about 80% above the recent price action but doe not truly reflect the most recent changes. The most recent activity has the stock trading in a range of $75 to $100 which assumes it is slightly over or fairly valued at the current levels.
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DocuSign Underwhelsm With Results And Outlook
DocuSign had a truly great quarter and the business is still strong but there are two problems. The first is that growth is slowing from the high double-digits to almost nill and what growth there is was already priced into the market. The company reported $580.8 million in net revenue for the quarter which is up 34.8% from last year and beat the consensus by 2.9% but the pace of growth is down from 42% and 50% in the two prior quarters and the guidance for Q1 is only flat. On the bottom line, earnings were also strong but only as expected and nothing to juice market sentiment. Turning to the guidance, the company is guiding the Q1 period well above the consensus which is good but sequential growth is ending and not expected to improve in Q2 through Q4 of this year.
“the demise of the DocuSign growth story continued as the WFH [work from home] poster child delivered good January results which were more than offset by very weak and concerning guidance which speaks to some darker days ahead,” Wedbush analysts Dan Ives wrote in a note to clients.
The Technical Outlook: DocuSign Is At A Bottom
The market for DocuSign capitulated in the wake of the Q4 results but it looks like a bottom is in play. Bottom-fishing, bargain hunting, institutional and insider activity has price action well off the low and heading higher with the indicators to back it up. Both MACD and stochastic are showing bullish crossovers that should get the price up to the short-term EMA at least. If the market can get the price above the EMA we see this stock entering a range with a possible top near $100. If the EMA can not be surpassed shares of DocuSign may hit a new low before it truly bottoms.
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