Hey everyone me kevin here. What the heck happened to docusign today is this overblown? Is this oversold, and is this potentially just the symptom of nervousness in this market, leading docusign to sell off like crazy, take a look at this indice futures, currently down about one-third to one-half of a percent uh in the after-hours here on the december second volatility index Up about three percent, if we jump on over, though to docusign, you can see the spy there starting to drop drop on over to docusign down 29 of the after hours. Docusign is a company that i've had a price, ideally a purchase price target of under 200. On so i haven't really been: buying docusign actually sold a little bit of docusend, and now we've got a 29 drop, much well below under 200 uh, so well, within where i originally thought that's kind of where i want to be buying it.

It's at a hundred and sixty-five dollars right now, if you zoom out for a moment, you'll see that 165 takes you about here to where this line is we run on over. That brings us over to q2 of 2020 pricing. That is absolutely insane. So how bad were the earnings? How bad were they to justify and nearly 30 percent sell off? Well folks, here's your answer: docusigns total revenue actually beat it came in with a beat 545 million.

This was a beat i'll. Tell you exactly what the beat was. Let me see here, earnings estimates and uh, then we'll look at the guidance, so the estimate was 531 million, so we actually had a beat on revenue for this quarter. 531 was the expectation, so we beat by about 2.6 on revenue.

We had a miss on billings. So net billings came in at 565. That is a miss of 3.7, so you had revenue coming in at 2.7. You had billings coming in at a minus 3.7 and then you had guidance coming in about two and a half percent short uh on the downside.

Here. Comparing to the midpoint, we were expecting uh guidance to come in with revenue of about 574.2. We ended up coming in with a range of 557 to 563, so from the midpoint. That's about a negative two point, two and a half percent.

So, in other words, we beat on revenue by two point: seven percent missed on billings by three point: seven percent missed on guidance by two point: five percent and the stock is selling off about 10x that or 30 freaking percent. It's pretty wild. Let's take a look at some of the fundamentals here to see if this is something we should be long-term concerned about. So first thing that i noticed is that this particular quarter the three months ending october.

I did comparisons. I always like to compare to the last quarter now in order to do that. I usually because they like to give you a year-over-year comparison, which i don't like doing as much so i had to pull up the other earnings for q2 of 2021, which is not a big deal. I did so.

I pulled those up and i was able to see that subscription revenue actually increased by 7.2 percent, their upsells weren't as strong, so their professional services were actually down 11, but this is a nominal number here. They could literally have zero here and they'd still be growing. Their subscription revenue - this is a company that makes money from subscription revenues so 7.2 increase month. I'm sorry quarter over quarter, not bad.

That's actually i mean if a company is growing 7.2 percent per year, that'd still be pretty decent, but this is a 7.2 quarterly uh subscription increase that works out to about a 28.8 percent annual growth rate in subscriptions, which is very good for the company slightly slower, Though than that 30 plus percent and even 40, that we've kind of been seeing in in prior quarters, thanks to how much has been pulled forward to electronic signatures for covin, which we'll talk more about that in a moment worth noting that international revenue came in at A 68 growth and now represents 23 percent of total revenue. I thought that was pretty interesting, because, personally, i don't love investing in international stocks, because i have a really hard time: understanding, uh circumstances and in different countries. Like i love embraer, i think it's a value play. I think it is a much better deal than boeing, but it's in brazil, where inflation's 10 - and i can't tell you when inflation's going to u-turn in well really anywhere, but but certainly not in brazil anyway.

So, taking a look, a little bit more down here subscription cost. This was interesting. In my opinion. This is actually a reason to be bullish here, because the miss was nominal, but look at this potential reason to be bullish.

Revenue in subscriptions was up 7.2 percent, but costs for servicing those subscriptions were actually flat compared to the last quarter. So you didn't see a seven percent increase in revenue cost there, which, in my opinion, is very very good. All of this, by the way is helping contribute to the fact that they're taking 81.2 dollars of gross profit for every 100 they make so they make a hundred dollars they're taking 81.2 dollars to their opex, which it used to be closer to 79. So we're actually seeing marginal improvement here, because it's costing them less to service their subscriptions and they're getting more subscriptions, which is a really good sign.

This helps increase margin. Now the company does still spend an insane amount of money on sales and there was even a reference in the earnings call to potentially the company pressuring their employees a little bit more leading to some, not so great glass door reviews for the last quarter, though they Still find that their reviews online are very, very uh, very good, but take a look at this. I'm just reading some of your glass door reviews here, which i know you take really seriously, and so it seems like q3 was tough on your sales force and docusign executives, responded here and said: hey look. We have an incredibly high glass door rating.

You don't need to worry about that, but uh they did seem to lament the fact a little bit that they weren't able to cross sell as well. So it's possible. That's maybe where some executive frustration did end up coming through no excuse. Obviously you want to take care of your employees.

The company is expected to be profitable next quarter, which is really really exciting, because it's a big u-turn for docusign. You can see here. It's just been losing a little less than uh a dollar per share regularly. Here.

Right now we're only at three cents of a loss, so if we can turn this to a profit next quarter and get back on track, maybe beat these lower estimates. I think this uh. This particular company has a really good u-turn potential, especially since we're selling at a relatively lower substantially lower valuation than where we were before. I agree that when docusign crossed 300, the valuation was ridiculous, but if we go ahead and jump out to 2025, which is typically what we're going to do for these growth companies, you're you're, probably going to end up looking at revenue of somewhere around 4.3 billion and We're probably going to be looking at an eps of somewhere around 3.55, and so, if you take 3.55 or actually take the current share price, which is now on sale at 165, divided by 3.55 you're going to be sitting at a forward pe of about 46.4, which Is substantially better than what this used to sit at i mean this was this used to look very, very, very ugly, we're even expecting in 2022, which is next year to be at almost half of that 1.75.

So, even if we only go out to one for 2022 we're sitting at about a 94 pe and for a company with the growth that we're seeing now 2022 expecting somewhere around 43 percent, so hoping we can get back on that growth. Trajectory which remember if, for 2022, we're expecting 43 percent growth, we're going to have to be growing a whole lot more than 7 percent right. We're going to have to be growing like 10 percent, a quarter 10 to 10.1 percent a quarter. So we're going to have to bump that up a little bit.

That's why i think there's some nervousness here in q3: hey, how are we possibly going to meet those 2022 and beyond estimates, but we do forecast at least wall street analysts forecast that we'll have growth, that'll settle closer to the mid 20s by 2025, and so this In my opinion puts this at a normal sort of profitable growth play or soon to be, profitable, growth play and the valuation for the kind of growth we're expecting it's high. But it's not ridiculous relative to some other companies. So, let's just go ahead and compare a little bit. Let's look at snowflake, for example, let's go with the 2022 and 2025..

Let's write this down so here we'll add a little page here and we'll write this down so that way we can do a little bit of relative comparison because i think that's always the thing that people go to is when a stock follows. You like. The valuation is so high, meanwhile, they've probably never done the math on the p e ratios or anything and probably don't even understand what the p e ratio actually means. So we're going to write this down at 20 22.

We'll do 96 here and 2025 will be 46.. Let's do a snowflake and just using wall street's estimates here for snowflake. We are expecting, let's see they're at about 360 bucks divided by only about 45 cents with snowflake. You want to talk valuation folks, look at snowflake, 2025 you're expecting an 800 pe.

Okay, let's do another one here: let's do one, that's maybe a little closer like upstart upstart's profitable. So i like upstar. There are certainly a different style of service, but let's jump into upstart, so upstart you're. Looking at a projected, i only have 2022 here.

Unfortunately, i don't have a 2025 so and snowflake's going to be negative, so infinite in 2022. So 2022 is going to be negative. We do not have a 20 25, so i'll just put null for this. We don't have estimates 2022 for upstart we're going to be looking at probably two dollars and 45 cents closed at 177, so 245 divided by there we go.

It puts us about 72, so it shows you upstart, with its recent larger sell-off kind of more pay, potentially in the direction of maybe where docusign might end up going, uh, which that'd be another little bit of compression here in the stock price right. So, there's definitely still the potential for software evaluation compression, and this is what we've talked about on the channel as of about three weeks ago, that we're probably going to see software valuations compress going forward. That's up start, although i do think upstarts, potentially a little bit on the oversold side trying to think of a company. That's maybe not as uh as mature as let's say, a company like adobe, but it might be worth comparing to adobe just because they also do e-signing products for what it's worth they're expecting uh 24 of eps in 2025.

So we divide that you're gon na be see you're only at about 11. right. So this is a mature company like uh adobe, 2025 valuation or pe of about 11, but their growth is would be expected to be a lot lower growth of around 11 to 13 percent. That's why i think, really looking for a software company that might be a little closer here.

I don't think roblox is on a path to possible profitability just yet so we might go with a palantir where we've also seen of substantia yeah, no real path to profitability. For roblox, yet, ah 2025, okay, actually 2025 - a buck 85 divide that by about 1 16 buck 85. roblox would be about 62., so we'll throw down roblox here, 62 for about 2025, that's probably a good comparison, and, let's maybe do one more here: let's go with Pallent here, let's see what we got for pallet here just so you can kind of see where docusign sits: valuation wise pound tier 20, 20 uh. We only go out to 2022, sadly, and so we'll be at about 20 cents there so 20 divided by well 20.

Is about a hundred so you're sitting at about you're sitting at a similar valuation as pound here right now? So if you think docusign is overvalued, you probably think that palantir is overvalued as well, given that you've got roughly the same valuation for palantir as you do, docusign, and both of them are expected to have about that 30 percent growth for the next three years. Going forward so this gives you a little bit of an idea that obviously compared to a much more mature company like adobe, where you're going to have softer growth in the future, it feels overvalued for for a company. That's a little newer, growing, more potentially growing, more substantially, palantiy or docusign seemed like a good comparison. Unless, of course, you really wanted to compare to something like let's try, paypal just for giggles we're moving into a different kind of industry here, but yeah.

If you think donkey signs overvalued, then stay far away from snowflake, and then you probably also think that palantir is overvalued, but anyway just do a quick comparison here, because i actually like paypal. I think paypal is definitely on the oversold side and you've got some more value over here. Paypal's growth will probably be a little less closer to like 19 percent 2025, but uh you're only paying about uh. What is a 187 divided by 10 you're, only paying about 18.7 times for 2025 here, so it gives you an idea.

I personally like having a balance when i invest in companies, so that way i have a little bit of exposure to companies that maybe have a little bit of a higher valuation which docusign does it's not ridiculous, like what you see at snowflake, and it has much More growth than something like adobe, but i also like companies like paypal, where i do have growth, but i've got that lower forward pe that we're looking at. So it gives you a little bit of an idea here. Let's also now just look at a few more things that came up in the earnings call just to make sure i'm covering everything here. So this was probably the most key phrase right here and that was in q3.

We saw demand, slow and the urgency of customer buying patterns temper, and this happened more quickly than we expected, so, unfortunately, that throws a little bit of doubt onto their potential forecast into the future. It is a company that i bought the dip in a little bit, which remember you always get my buy, sell alerts, link down below in the programs. That's cyber monday coupon code ending this friday, but this is a company that i probably won't have as a massive portion of my portfolio. It's a company i like in my portfolio, but it probably ended up being something more like a one to two percenter in the portfolio.

Maybe i'd get this up to about three percent if we see a bit more of a dip tomorrow, probably if we saw positive news on jobs, positive news on some of the catalysts coming out over the next 24 hours to two weeks, i'd probably purchase pick up A little bit more docusign, but i would offset that by making sure i invested in other companies that had those lower valuations going forward. Specifically my favorites, really being more hardware, plays whether that's or fintech plays so paypal square. Sofi companies like this sofa could actually be a decent comparison, because there are a lot of sofi bulls that and i think in fairness, you may as well just do a quick sofi comparison, so sofi uh right now barely has a path to profitability expecting about 64 Cents of rev in 2025, profitable 2023, divided by 0.64, puts them at about 25.6 times uh for 2025.. So it shows you so far sold off nicely to where you're getting that lower 4p about 25.6 again over here, you're still paying about 46 for it.

So you're still on a little bit over the upper side: okay, good uh, the global sales aspect. I really like really appreciate being able to have some growth in global markets. I think that's phenomenal. One of the things that i really love is that they're really working on their sms and really identification processes.

So that way you could do virtual signings for more documents. Specifically, this is something i'm most excited about, because i'm so tired of getting these people coming to my house in person having to pay for them doc, you say notary, that's a game changer for a notaries potentially for their business in the future, but also just the Amount of ease and the willingness that you'd want to pay for a service with docusign i mean i'd rather pay docusign 20 bucks and they could split it with a notary that have to go meet a notary and pay 200 bucks for mobile notary, or something like That but anyway, uh you've got google microsoft partnering with them more partnerships with salesforce they're convinced the growth opportunity for docusign remains largely untapped. Obviously, this is what they're saying uh margin increases. You move removing the covet tailwind a little bit.

They talked about talked about a lot of verticals that they get still go through to make sure that they expand their sales, a lot of opportunities to go and 63 billing growth from q3 of last year. It's very very incredible. It's still very good growth, but again we want to make sure that growth come back comes back, so you're, making a bet with docusign that growth is going to come back here in this this winter time frame for next quarter. Hopefully, people spend a lot of money on their uh.

You know there's their sign ups towards the end of the year. So that way you get more docusign customers and they get their tax, write off right. Net retention actually doing very well still, 121 percent. They don't publish churn, but this is higher than the historical range of 114 to 119.

This just means they're able to upsell their customers a little bit more, and then we talked a little bit about the glass store commentary and that's it. So this gives you a little bit of an idea into what the heck is happening happening at docusign also gives you a bit of a relative valuation, so you have kind of an understanding of where they compare to valuation-wise docusign very much like a palantir, much lower Valuation than a snowflake, but not as good as something like a paypal, a sofi or an adobe valuation-wise. So anyway, it could be because you still have a lot of covert traders in it. Who, as covid, goes away, will end up trading out of docusign.

That's a very real risk and it is a potential cause for shorter term concern so anyway, thank you so much for watching this video. Hopefully this was very helpful and insightful for you if it was consider smashing that, like button sharing the video check out the programs down below and folks we'll see in the next one thanks again goodbye.