DocuSign, Inc. (DOCU) sees growth in monthly customer adoption

We recently published a list The 16 Best Mid-Cap Growth Stocks to Buy NowIn this article, we’ll take a look at where DocuSign, Inc. (NASDAQ:DOCU) stacks up against other top mid-cap growth stocks.

50 basis point cut: overkill or hidden benefit?

Recent discussions among financial strategists underscore the current dynamics in the stock market, especially with the upcoming U.S. election. Investors are being encouraged to view declines in certain sectors as long-term buying opportunities, as historical trends suggest that 10% corrections can be favorable entry points.

While the recent sell-off has been driven by sectoral issues rather than broader economic concerns, the long-term outlook remains positive. Despite recession fears, the U.S. economy is solid, with strong consumer and corporate earnings exceeding expectations. This has helped the NASDAQ and S&P 500 rebound.

Inflation reportedly fell to a three-year low of 2.6% in August, marking the lowest rate since March 2021. As inflation continues to fall, there is speculation that the Fed could begin to cut interest rates, potentially starting with a 25 basis point cut.

Market analysts, including Gene Goldman and Craig Johnson, are predicting multiple rate cuts due to slowing inflation and economic growth. We discussed this earlier in our article on 12 Best Small-Cap Tech Stocks to BuyHere’s an excerpt from it:

“Gene Goldman said his base case scenario calls for three rate cuts of 25 basis points each, starting in September. His belief is based on slowing inflation, slowing economic growth and the overall resilience of the economy, which he believes is not as bad as some reports suggest. Goldman noted that while the labor market has shown mixed signals, with both positive and negative data, market expectations for deeper rate cuts may be overstated…

Craig Johnson also felt that a 25 basis point cut was already being anticipated by the market, suggesting that a 50 basis point cut could raise concerns among investors. He believes that a series of 25 basis point cuts would be in line with their outlook. Craig stressed the importance of remaining calm, given that October has historically been a strong month for markets, with gains having been seen in 86% of cases since 1929.”

However, on September 16, Erika Najarian, senior equity research analyst at UBS, said small- and mid-cap stocks could potentially benefit from a 50 basis point cut.

Najarian attributes the recent weak performance of financial stocks to market concerns about the impact of potential rate cuts on economic stability, leading investors to question the less favorable economic outlook. He believes some of the anticipated cuts may already be reflected in money center bank stocks given their strong performance year to date. A 50 basis point cut could be particularly beneficial for mid-cap stocks that have been hurt by the problems in commercial real estate.

He explains that a 50 basis point cut would have a significant impact on net interest income. Financial center banks benefit more from a rate increase, while midcaps are liability-sensitive and could see a quicker change in deposit valuations, which would benefit them if rates were cut aggressively.

The recent news of Basel III with lower capital thresholds has sparked negative stock market reaction, exacerbated by JPMorgan’s comments on lowered growth targets for investment banking and trading. Factors included ongoing discussions on Basel III from December 2023 weighing on prices, a leading bank suggesting that consensus expectations for net interest income are too high, casting a shadow over other banks, and emerging signs of consumer weakness potentially spreading beyond lower-income segments.

Najarian highlights the challenges analysts face in forecasting net interest income due to changing interest rate expectations. While higher interest rates have traditionally been good for bank profitability, potential cuts create uncertainty about financial results. He notes that banks must choose between cutting interest rates to remain competitive and maintaining volume, which complicates net interest income forecasts.

As Najarian highlights the uncertainty surrounding interest rate cuts and their impact on the financial sector, and as investors await clarity from the Fed, we present a list The 16 Best Mid-Cap Growth Stocks to Buy Now.

Why are we interested in the stocks that hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (SMore details can be found here).

DocuSign, Inc. (DOCU) sees growth in monthly customer adoption

A software engineer sits in front of a computer screen and writes the code needed to create electronic signature software.

Docusign Inc. (NASDAQ:DOCUMENT)

Market capitalization as of September 13: $11.49 billion

Number of hedge fund owners: 44

Docusign Inc. (NASDAQ:DOCU) provides organizations with products to manage electronic contracts with e-signatures across devices, streamlining workflows and reducing paper usage. Its software is used in industries such as law, real estate, human resources, and finance, with ~1.5 million customers in 180 countries.

The company launched the first version of its Intelligent Agreement Management (IAM) platform in Q2, a significant release in the company’s history as it has the potential to address the $2 trillion in lost economic value faced by contract management organizations.

The IAM solution was launched for small and medium commercial customers in the United States, Canada and Australia, with a focus on training for Salesforce teams in the third quarter.

In the second quarter of this year, the company’s revenue was $736.03 million, up 7.03%. Earnings per share were $0.97. Both metrics beat Street estimates. This strong performance reflects the company’s focus on increasing product innovation, developing multi-channel go-to-market strategies, and improving operational efficiency.

Direct customer growth remained strong, up 12% year over year. High-value customers with more than $300,000 in ACV saw modest improvement. Contract Lifecycle Management (CLM) revenue growth outpaced overall growth, while the company strengthened partnerships with Microsoft, SAP and Salesforce, with co-selling through Azure Marketplace and Copilot integrations.

Docusign Inc.’s (NASDAQ:DOCU) early results with its new IAM platform are promising, with higher win rates, larger deal sizes, and faster close times. Customer adoption is growing month over month, and the company is focused on continually increasing the value of IAM to more customers. This positions the company for long-term success.

Polen Focus Growth Strategy posted the following comment on DocuSign, Inc. (NASDAQ:DOCU) in its Q3 2023 report. investor letter:

“We have eliminated our remaining 1% position in DocuSign, Inc. (NASDAQ:DOCU). While the company remains a leader by a large margin in the high end of the digital signature market, it has become clear to us that its addressable e-signature market is likely much smaller than we thought, or that it will take much longer to grow than we anticipated. The low end of the market is very competitive. We have been patient with our very small position. Impressive new management has joined with Google and The Trade Desk in the hope that they will be able to revive growth in entry-level e-signature. However, this still does not seem likely in the near term, as the new management states that the company will need to develop new products to achieve higher levels of e-signature growth, despite what we believe to be low penetration rates in existing e-signature products. As such, we have used the proceeds from our sale to partly fund our Novo position.”

Generally speaking, DOCU takes 10th place on our list of the best mid-cap growth stocks to buy now. While we recognize DOCU’s potential as an investment, our belief is based on the belief that AI stocks have a good chance of delivering strong returns in a shorter time frame. If you’re looking for an AI stock that’s more promising than DOCU but is trading at less than 5 times earnings, check out our report on cheapest AI action.

READ MORE: $30 Trillion Opportunity: The 15 Best Humanoid Robot Stocks to Buy, According to Morgan Stanley AND Jim Cramer says NVIDIA has ‘become a wasteland’.

Disclosure: None. This article was originally published on Insider Monkey.