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Docusign Investors Just Got Some Bullish News
DocuSign (NASDAQ: DOCU) was a darling of the market during and in the year following the onset of COVID. But with the pandemic catalyst fading in the rearview mirror now, DocuSign could certainly use some bullish news.
Investors know full well that the company has to compete with the e-signature offerings of tech giants, particularly Microsoft's SharePoint eSignature and Adobe's Acrobat Sign. Perhaps if DocuSign can effectively integrate artificial intelligence (AI) into its products -- and if the company can get some help from an AI specialist business -- the stock might finally show some signs of life in 2024.
Growing, but going nowhere
After a sharp pandemic-fueled rally through August of 2021, DocuSign stock dropped like a rock along with many other tech stocks at that time. However, whereas large-cap tech stocks generally rebounded in 2023 and the first half of 2024, DocuSign shares have been stuck in a frustrating range.
It seems that the company got left in the dust while investors piled into "Magnificent Seven" tech stocks. Perhaps this rotation into these companies was inevitable because they seemed like relative safe havens amid a series of interest rate hikes.
Meanwhile, DocuSign performed reasonably well in fiscal 2024 with 10% year-over-year revenue growth. Moreover, the company flipped from a net loss of $0.49 per share in the prior year (under generally accepted accounting principles) to net income of $0.36 in fiscal 2024.
However, at a time when Nvidia conditioned investors to view triple-digit growth as normal, evidently DocuSign's 10% sales growth didn't impress investors. Besides, in a post-pandemic world, the market has a new obsession in 2023 and 2024, and that's AI.
This, then, raises the question of whether there's any news that could give DocuSign's shareholders reason to continue hoping for a breakout moment.
Giving the people what they want
As 2024 heads toward its second half, tech businesses can't afford to delay AI integration into their products anymore. DocuSign certainly needs to reassure investors that it's taking AI seriously, especially since the company has to compete with early and aggressive AI adopter Microsoft.
To that end, DocuSign moved in the right direction in April when the company unveiled its Intelligent Agreement Management platform, known as DocuSign IAM. The announcement quenched the market's insatiable thirst for AI tech with the revelation that the new platform will "leverage AI to speed up contract creation, enhance negotiations, and provide strategic insights to help companies manage their agreement portfolios."
If investors wanted to see the company jump on the AI bandwagon, then DocuSign evidently gave the people exactly what they wanted. Yet the stock remains range-bound and directionless in 2024 so far.
That's not the end of the story, though. Investors just got some bullish news in the form of an acquisition announcement. Specifically, DocuSign completed its buyout of AI-powered agreement management specialist Lexion.
The press release didn't provide much detail, but it suggested that the integration of Lexicon's technology will add "more AI-assisted capabilities to the DocuSign IAM platform." Furthermore, CEO Allan Thygesen had little choice but to mention AI at least once; he fulfilled that requirement by touting the upcoming "winning combination of Lexion's AI innovation and DocuSign IAM's smart, powerful platform."
While DocuSign's headfirst dive into AI integration feels bullish, it certainly doesn't guarantee revenue or income growth. Hence, investors should keep tabs on the company's remaining quarterly reports this year to gauge the financial impact of the Lexion acquisition.
Still, for what it's worth, DocuSign is immersing itself in AI technology, and that's what 2024's investors probably want to see. So if you see the Lexion buyout as a largely unnoticed positive catalyst, today might be a good day to pick up a few shares in anticipation of a possibly overdue breakout.
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David Moadel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe, DocuSign, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
