Analyst Note| Dan Romanoff, CPA |
Narrow-moat DocuSign again reported strong quarterly results, including upside to our revenue and EPS expectations, and also provided a similarly strong outlook for the fourth quarter. All metrics once again were strong. Like other work-from-home enablers, DocuSign continues to benefit from an immediate surge in new customers and expansion of use cases within existing customers. We think the Agreement Cloud will begin to shine in fiscal 2021 and think DocuSign’s quarter reinforces the notion that the company is benefiting from a market that is largely greenfield. We also think the recent acquisitions of Seal for AI and Liveoak for video collaboration and remote notary service expand the TAM and make the Agreement Cloud a more attractive platform. Based on near-term benefits of ongoing lockdowns, more sustainable growth, and a rapidly improving margin profile, we are significantly raising our fair value estimate to $152 per share, from $112 previously, although we still see shares as trading at a premium.