DocuSign: An Antifragile Stock In Times Of Coronavirus

Summary

• DocuSign is benefitting from massive demand for document digitalization in times of social distancing.
• The coronavirus pandemic will accelerate growth and adoption.
• Revenue is growing at full speed and profitability is increasing.
• Valuation is not particularly cheap, but not excessive either.
• Both in the short term and in the long term, the risk vs. reward trade-off in DocuSign looks clearly attractive.
• I do much more than just articles at The Data Driven Investor: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. Yet, in spite of the ubiquity of the phenomenon, there is no word for the exact opposite of fragile. Let us call it antifragile. Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better.

Source: Nassim Taleb. Antifragile: Things That Gain from Disorder (Incerto)

The sanitary and economic crisis produced by COVID-19 will have long-lasting effects on society and the economy. Some businesses will recover well from the crisis, while others will suffer permanent and irreparable damage. Importantly, some antifragile companies such as DocuSign (NASDAQ:DOCU) will emerge from this crisis in a stronger than ever shape.

DocuSign Is Strong And Getting Stronger

DocuSign is a market leader in electronic signatures and contracts life cycle management software. The company is modernizing the contracting process by transforming the paper-based manual sequences of steps into an automated digital and collaborative system. This has enormous advantages in terms of time savings, cost reductions, and all kinds of efficiencies.

In addition to cost and efficiency advantages, DocuSign drives major enhancements in security. Documents signed through DocuSign are court-admissible and they contain an audit trail that considers variables such as IP address, location, and chain of custody. Besides, reducing paper use has huge advantages from an ecological perspective.

The big surge in work from home during the coronavirus pandemic will drive a material increase in demand for the services provided by DocuSign, and most of the companies that digitalize their paperwork and contracts will never go back to managing their documents in the old ways. On the contrary, DocuSign typically starts selling a relatively simple solution, and then it expands its relationship with more services over time.

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, but may initiate a long position in DOCU over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.