We all knew that once the re-opening is in play, it will impact DocuSign’s business although more and more companies are going through digital transformations. Not too many people thought we would see the bloodbath we saw last week.
For someone bullish on $DOCU since the pandemic and got in around $48 and sold it around $167. It was not a bad return. Of course, I regretted selling too early but I also saw what’s coming as I have spoken to few companies and realized that $DOCU business would be vulnerable down the road.
So what conversations did I have?
- Gartner has a list of a dozen or so competitors including $ADBE
- So many companies are getting into $DOCU business at an alarming rate. I had a phone call with them and it’s one of the most well-known online legal document provider.
- Some companies are even under the radar but growing at double digit rate such as Exela ($XELA)
$ADBE, too expensive so I decided to pass. $XELA, troubling since it’s hovering around $1 although it used to be $30 several years ago. But let’s think about one scenario.
How much would $XELA should be worth if they can capture 1% of $DOCU’s market share.
Docusign
- Market cap: $26.5 B
- Revenue: $1.45B
- 1% of Revenue =$14.5 million or $265 million in market cap
What’s Exela’s?
- Market cap: $201 million
- Revenue: $1.29B
- If they can capture 1% of DocuSign’s market share AND get that high multiple = $265M + $201M = $466M
- That would mean more than 2x from where it is today.
Are you seeing what I am seeing? If (and yes, it’s a big if), capturing 1% of DocuSign’s market share leveraging their existing clients, I think the stock price can double or triple from where it is today. It might even go up a lot more.
Given the track record and their stock price, maybe this is too optimistic. But when it’s this cheap, I think it’s worth a look. Then again, do your own DD before you make any investment decisions.
