{"id":8405,"date":"2022-06-19T13:13:10","date_gmt":"2022-06-19T18:13:10","guid":{"rendered":"http:\/\/blog.jlbn.net\/?p=8405"},"modified":"2022-06-19T14:39:14","modified_gmt":"2022-06-19T19:39:14","slug":"tech-sell-off-1-nasdaq-stock-down-62-to-buy-before-it-starts-soaring","status":"publish","type":"post","link":"http:\/\/blog.jlbn.net\/?p=8405","title":{"rendered":"Tech Sell-Off: 1 Nasdaq Stock Down 62% to Buy Before It Starts Soaring"},"content":{"rendered":"\n<ul><li>In January, DocuSign CEO Daniel Springer spent $2.4 million on DocuSign shares that cost as much as $147 apiece.<\/li><li>Two months later, DocuSign&#8217;s price was cut in half, and Springer spent $5 million more on DocuSign stock.<\/li><li>Today, DocuSign has fallen another 20%-plus. Is it finally time to buy?<\/li><\/ul>\n\n\n\n<h2>Even DocuSign&#8217;s own CEO couldn&#8217;t believe the company would ever get this cheap again.<\/h2>\n\n\n\n<p>2022 has been a lousy year to own&nbsp;<a href=\"https:\/\/www.fool.com\/investing\/stock-market\/market-sectors\/information-technology\/\">tech stocks<\/a>&nbsp;&#8212; no doubt about it. Since the start of this year, the&nbsp;<a href=\"https:\/\/www.fool.com\/investing\/stock-market\/exchange\/nasdaq\/\">Nasdaq<\/a>composite index has shed more than 30% of its value, meaning the Nasdaq is now in an undeniable bear market. (Technically speaking, you really only need a&nbsp;<em>20<\/em>% decline to qualify as a&nbsp;<a href=\"https:\/\/www.fool.com\/investing\/how-to-invest\/bear-market\/\">bear market.<\/a>) &nbsp;<\/p>\n\n\n\n<p>And it gets worse.<\/p>\n\n\n\n<p>The Nasdaq may be down 30%, but individual Nasdaq stocks have fallen much, much more. Case in point: E-signature company\u00a0<strong>DocuSign<\/strong>\u00a0<strong>(<a href=\"https:\/\/www.fool.com\/quote\/nasdaq\/docu\/\">DOCU<\/a>\u00a06.58%)<\/strong>\u00a0&#8212; that&#8217;s the one that lets you &#8220;e-sign&#8221; your contracts and mortgage paperwork online &#8212; has crashed 62% since the year began. If tech stocks are in a bear market, DocuSign is in a double-bear market.<\/p>\n\n\n\n<h2>Opportunity knocks&#8230;<\/h2>\n\n\n\n<p>And yet, this could be great news for investors who&#8217;ve been waiting for a chance to buy DocuSign on the cheap. To find out why, let&#8217;s take a look at the numbers.<\/p>\n\n\n\n<p>Currently valued at $11.8 billion in market capitalization, DocuSign has no P\/E ratio because according to generally accepted accounting principles (<a href=\"https:\/\/www.fool.com\/investing\/how-to-invest\/stocks\/generally-accepted-accounting-principles\/\">GAAP<\/a>), the company has no &#8220;P&#8221; &#8212; i.e., it&#8217;s technically not &#8220;profitable.&#8221; But in fact, DocuSign&nbsp;<em>is&nbsp;<\/em>a very profitable business, generating cash profits &#8212;&nbsp;<a href=\"https:\/\/www.fool.com\/investing\/how-to-invest\/stocks\/free-cash-flow\/\">free cash flow<\/a>&nbsp;&#8212; of nearly $500 million over just the past year alone.<\/p>\n\n\n\n<p>Furthermore, as DocuSign piles up cash, its enterprise value gets even cheaper. Subtracting net cash from market capitalization gives us an enterprise value of only $11.7 billion for DocuSign, and an enterprise value-to-free cash flow ratio of only 23.4. For a stock that analysts expect will grow its profits 16.5% annually over the next five years, that&#8217;s not at all a high price, and not a bad valuation at all for an apparently &#8220;unprofitable&#8221; stock.<\/p>\n\n\n\n<h2>&#8230;and the CEO answers<\/h2>\n\n\n\n<p>It&#8217;s not just me thinking that, by the way. Fact is, DocuSign&#8217;s own CEO seems convinced that DocuSign&#8217;s current share price of less than $60 is a screaming bargain, too. And we know this because, back in January 2022, as the tech sell-off was just getting underway, DocuSign CEO Daniel Springer laid out $2.4 million to buy DocuSign shares for his own account &#8212; at share prices&nbsp;<a href=\"https:\/\/www.fool.com\/investing\/2022\/01\/11\/why-docusign-stock-popped-today\/\">as high as $147<\/a>.<\/p>\n\n\n\n<p>As DocuSign shares continued to fall, Springer doubled his bet in March, spending another $5 million on DocuSign stock at prices as high\u00a0<a href=\"https:\/\/www.fool.com\/investing\/2022\/03\/18\/why-docusign-stock-popped-today\/\">as $76.45<\/a>.<\/p>\n\n\n\n<p>And now it&#8217;s June, and DocuSign stock is down another 20% &#8212; and selling for less than half what the CEO paid when he first went stock-shopping in January. (By the way, I kind of suspect that Springer is kicking himself for not waiting longer to begin his buying. At this point, he may even be a bit tapped for cash, and unable to buy much more.)<\/p>\n\n\n\n<p>But that doesn&#8217;t mean&nbsp;<em>you&nbsp;<\/em>can&#8217;t. And in fact, I think now might be a great time to buy before DocuSign stocks soars again.<\/p>\n\n\n\n<h2>E-signatures are the future<\/h2>\n\n\n\n<p>Consider this: DocuSign stock is down hard since&nbsp;<a href=\"https:\/\/www.fool.com\/earnings\/call-transcripts\/2022\/06\/09\/docusign-docu-q1-2023-earnings-call-transcript\/\">reporting earnings<\/a>&nbsp;last week, but those earnings were anything but bad. Revenues grew 25% year over year, and if you assume (as I do) that as DocuSign grows, its profit margins will increase rather than decrease or hold steady, this suggests that over time, DocuSign&#8217;s profits should grow faster than revenues &#8212; and that the company will outperform analysts&#8217; predictions of only 16.5% earnings growth.<\/p>\n\n\n\n<p>Indeed, if you look at the company&#8217;s cash flow statement from last quarter, this is exactly what happened. Although DocuSign remained technically unprofitable, its free cash flow in the quarter grew 42%.<\/p>\n\n\n\n<p>Right now, a lot of investors seem to be betting that DocuSign&#8217;s growth was some kind of pandemic fluke &#8212; and DocuSign&#8217;s stock is suffering the consequences. But if you ask me, what the pandemic really taught us is that remote work can be just as efficient &#8212; or&nbsp;<em>more<\/em>&nbsp;efficient &#8212; than office work. As more&nbsp; business is conducted online, it just makes sense that e-signatures are the way most documents will be signed in the future.<\/p>\n\n\n\n<p>As the market leader in e-signatures, with a 70% market share in the U.S., DocuSign seems to me the right way to play this trend. And if we can do that while also paying a bargain-basement price &#8212; less than half what the CEO paid for DocuSign stock &#8212; that&#8217;s a deal I want to take.<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In January, DocuSign CEO Daniel Springer spent $2.4 million on DocuSign shares that cost as much as $147 apiece. Two<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[254,3421,3422],"tags":[888,3425],"_links":{"self":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/8405"}],"collection":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=8405"}],"version-history":[{"count":2,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/8405\/revisions"}],"predecessor-version":[{"id":8407,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/8405\/revisions\/8407"}],"wp:attachment":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8405"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8405"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8405"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}