S&P 500 (SPY) Rallies Ahead Of The Weekend

Key Insights

  • Leading tech stocks gained strong upside momentum, providing support to S&P 500.
  • Energy stocks moved higher as WTI oil rebounded above the $86 level. 
  • A move above 4050 will push S&P 500 towards the resistance at 4080.

S&P 500 Tests Resistance At 4050

S&P 500 is trying to settle above 4050 as stocks rally amid growing appetite for risk. The U.S. dollar pulled back from recent highs, while Treasury yields moved lower, providing support to leading tech stocks.  Tesla, Meta, NVIDIA are up by 3-4% in today’s trading session.

Energy stocks have also provided material support to S&P 500 as WTI oil rallied towards the $86 level. In general, today’s rebound was broad, and all market segments moved higher.

Not surprisingly, defensive sectors were among the worst performers as traders rushed to buy tech and energy stocks.

S&P 500

S&P 500 is currently trying to settle back above the resistance at the 50 EMA, which is located near the 4050 level. In case this attempt is successful, S&P 500 will move towards the resistance at 4080.

A move above 4080 will push S&P 500 towards the next resistance at 4100. If S&P 500 gets above this level, it will head towards the resistance at 4115.

On the support side, a move below 4050 will push S&P 500 towards the support level at 4015. In case S&P 500 declines below this level, it will head towards the next support at 4000.

DocuSign Rallies After Strong Earnings Report

DocuSign is up by 10% after the release of a strong earnings report. The company reported revenue of $622 million and adjusted earnings of $0.44 per share, beating analyst estimates on both earnings and revenue. It should be noted that DocuSign stock is down by 80% from 2021 highs, so market’s expectations were modest ahead of the report.

Coinbase is up by 8% amid a strong rebound in crypto markets. Bitcoin gained strong upside momentum and moved back above the $21,000 level, proving support to all crypto-related assets.

From a big picture point of view, it looks that traders want to increase their positions in riskier assets. For example, ARK Innovation ETF, which focused on high-growth companies, is up by more than 4% today.

Next week, S&P 500 dynamics will depend on whether leading tech stocks continue to rebound. In case Treasury yields move back to recent highs, stocks may face material resistance.

For a look at all of today’s economic events, check out our economic calendar.

DocuSign Remains Under Pressure After Disappointing Report

Key Insights

  • DocuSign has recently reported its fiscal first quarter results, missing analyst estimates on earnings. 
  • Analysts rushed to downgrade the stock, putting additional pressure on DocuSign shares. 
  • The stock has lost 80% of its value from all-time high levels but trades at 30 forward P/E, which is not cheap. 

DocuSign Falls After Another Analyst Downgrade

Shares of DocuSign gained additional downside momentum after Wolfe Research downgraded the stock.

On Friday, DocuSign stock suffered a big hit after the company released its quarterly report. The company reported revenue of $589 million and adjusted earnings of $0.38 per share, beating analyst estimates on revenue and missing them on earnings. In the next fiscal quarter, DocuSign expects to report revenue of $600 million – $604 million.

The weak report and disappointing guidance serve as significant bearish catalysts for DocuSign stock, which is trading at levels that were last seen back in September 2019.

What’s Next For DocuSign Stock?

Analyst estimates for DocuSign have been moving lower in recent months. Currently, the company is expected to report earnings of $1.75 per share in the current fiscal year and earnings of $2.01 per share in the next fiscal year, so the stock is trading at 30 forward P/E.

Such valuation levels are expensive for companies that face slower growth. In addition, the market is worried about Fed’s rate hikes. Falling earnings estimates and rising Treasury yields will continue to put pressure on DocuSign shares in the upcoming weeks.

In this light, it remains to be seen whether speculative traders will be ready to buy DocuSign shares at current levels. The company’s valuation remains expensive, and there is a significant potential for multiple contraction.

The stock has lost roughly 80% of its value from the highs that were reached back in September 2021, but it does not look cheap.

To keep up with the latest earnings updates, visit our earnings calendar.

Why DocuSign Stock Is Down By 22% Today

Key Insights

  • DocuSign beats analyst estimates on revenue and meets them on earnings. 
  • The company’s guidance highlights slowing growth. 
  • DocuSign remains a rather expensive stock despite the strong pullback.

DocuSign Stock Drops As Traders Focus On Slowing Growth

Shares of the e-signature company DocuSign gained strong downside momentum after the company released its fourth-quarter report.

DocuSign reported total revenue of $580.8 million and adjusted earnings of $0.48 per share, beating analyst estimates on revenue and meeting them on earnings.

On a GAAP basis, the company reported a loss of $0.15 per share. The company noted that its subscription revenue increased by 37% on a year-over-year basis and totaled $564 million.

In the first quarter, the company expects to report total revenue of $579 million – $583 million and subscription revenue of $562 million – $566 million.

The market focused on the company’s disappointing guidance which highlighted slowing growth, and the stock moved below the $75 level.

What’s Next For DocuSign Stock?

Analysts expect that DocuSign will report earnings of $2.15 per share in the current fiscal year, so the stock is trading at 34 forward P/E.

The company’s valuation has dramatically decreased in recent months as DocuSign stock declined from the highs near $315 that were reached back in September 2021 to the $73 level. However, the company is still not cheap at current levels.

The market is worried that the major boost from the shift to work-from-home is over, and DocuSign’s growth will slow down materially. In addition, the market is sensitive to growth rates of high-PE stocks in the current environment, so it’s not surprising to see that DocuSign stock is down by more than 20% after the disappointing report.

It remains to be seen whether traders will rush to buy DocuSign shares in the upcoming trading sessions as the trading action in recent months indicated that similar stocks remained under pressure for weeks after disappointing reports.

For a look at all of today’s economic events, check out our economic calendar.

A Divergence Between S&P 500 and the Stock Market Breadth May Signal a Market Top

SPX Daily Chart

Based on the comparison between the Percentage of stocks above 200-Day average and the SPX for the past 10 years, the divergence happened since Feb 2021 as the SPX continue to trend higher, the number of stocks participated in the uptrend is getting lesser, deteriorated from 90% to 42% as of last Friday since Feb 2021.

In fact, many growth stocks such as Affirm Holdings (AFRM), CrowdStrike Holdings (CRWD), Fiverr International (FVRR), MercadoLibre (MELI), Sea (SE), Twilio (TWLO), DocuSign (DOCU), Roku (ROKU), PayPal Holdings (PYPL), etc…experienced big drawdowns range from 32%-65% from their all time high.

There are only a handful of outperforming stocks like Apple (AAPL), Microsoft (MSFT), Lam Research (LRCX), Broadcom (AVGO), Qualcomm (QCOM), etc… supporting the S&P 500 index.

The divergence between the SPX and the stock market breadth are certainly not a healthy sign for the bull market especially it has been persisting for nearly 10 months. It might only take a few early capitulations from the funds to trigger a broad market sell-off when the market is at the vulnerable point.

It can be noticed from the chart that 50% level is a support. When the percentage of stocks above 200-Day average dropped below 50%, there was a relatively sharp sell-off in SPX, as highlighted in orange color in 2011, 2014, 2015 and 2018. The market breadth is often acted as a leading indicator before the damage hits the SPX.

Current Market Outlook on S&P 500

S&P 500 did have a rally after an oversold condition at the support area while there was presence of demand as pointed in last week’s article. Detailed analysis can be found by watching the price volume analysis for the market outlook on YouTube.

As shown in the screenshot on 8 Dec from my private Telegram Group for Mastering Price Action Trading course above, the four US major indices – S&P 500 (SPX), Dow Jones (DJI), Nasdaq (IXIC) and Russell 2000 (RUT) are likely in a consolidation with high volatility to both sides.

It is obvious that there was an increase of supply on the down wave since Black Friday selloff, which is yet to be tested. As S&P 500 approaches the resistance zone at 4700, it could be vulnerable for a correction when the sellers step in to lock in profit or initiate short positions. Should a correction happen, the previous swing low near 4500 is a natural area for buyers to step in for bargain hunting.

It is critical to judge the supply level together with the characteristics of the price action (spread and velocity) to anticipate next move. For a bearish scenario, watch out for a Wyckoff up thrust (false breakout) with increasing supply followed by a break below 4650. For bullish case, S&P 500 needs to commit above the resistance level at 4720.

Based on the market breadth and the Wyckoff phase analysis on SPX, a trading range between 4500-4700 is expected. There could be other headwind ahead such as Fed’s tapering of the bond-buying program and an urgency for interest rate hike, which I will be discussing in my weekly live session on Sunday. Click here to visit TradePrecise.com to get your weekly market insights straight to your inbox for free.

Why DocuSign Stock Is Down By 40% Today

DocuSign Stock Plunges As Company’s Growth Slows Down

Shares of DocuSign found themselves under huge pressure after the company released its quarterly report. DocuSign reported revenue of $545 million and adjusted earnings of $0.58 per share, beating analyst estimates on both earnings and revenue.

However, its fourth-quarter revenue forecast disappointed. The company expects to report revenue of $557 million – $563 million, which means that growth is slowing down.

The company’s CEO Dan Springer stated: “After six quarters of accelerated growth, we saw customers return to more normalized buying patterns, resulting in 28% year-over-year billings growth”.

These are not the words that investors would like to hear from a high-growth company. Not surprisingly, analysts rushed to cut their price targets for DocuSign stock, putting additional pressure on the company’s shares.

What’s Next For DocuSign Stock?

Currently, analysts expect that DocuSign will report earnings of $1.7 per share this year and $2.19 per share in the next year, so the stock is trading at 64 forward P/E despite the massive sell-off.

The company’s rich valuation is the main reason for the current weakness of its stock. At such valuation levels, traders expect fast growth. When growth begins to slow down, the stock is punished. Similar pandemic-era examples include Zoom, which is down by about 70% from highs that were reached back in October 2020, and Peloton, which is down by more than 70% year-to-date.

Investors and traders have already seen what happens to high-flying stocks when companies’ growth slows down, so they rush to exits at first signs of weaker growth. In DocuSign’s case, potential for multiple compression remains significant even after the strong sell-off.

In this light, it remains to be seen whether speculative traders will rush to buy DocuSign shares. Examples like Zoom and Peloton show that it is difficult to find a bottom in such situations, so traders may stay away from DocuSign stock in the upcoming trading sessions.

For a look at all of today’s economic events, check out our economic calendar.

DocuSign Raises Annual Guidance for Revenue; Target Price $389 in Best-Case Scenario

DocuSign, an American company that allows organizations to manage electronic agreements, reported better-than-expected earnings and revenue in the second quarter and raised its full-year revenue guidance.

The San Francisco, California-based company reported quarterly adjusted earnings of $0.47 per share for the quarter ended in July, beating the Wall Street consensus estimates of $0.40 per share.

DocuSign said its revenue jumped nearly 50% to $511.8 million from a year ago. That was higher than the market expectations of $485.27 million.

The company raised its annual revenue forecast from $2.027-$2.039 billion to $2.078-$2.088 billion. It was higher than analysts’ expectations of roughly $2.05 billion. Additionally, DocuSign raised its subscription revenue forecast to $1.995-$2.005 billion from $1.953-$1.965 billion previously.

DocuSign shares closed nearly flat at $294.57 on Thursday. The stock rose over 30% so far this year.

Analyst Comments

DocuSign (DOCU) reported 45% billings growth at $2B revenue scale and crossed the 1M customer threshold while delivering 32% FCF margin – an impressive achievement. As the company maintains leadership in eSign and builds Agreement Cloud, we see plenty of growth to come. Remain OW with $350 price target,” noted Stan Zlotsky, equity analyst at Morgan Stanley.

DocuSign (DOCU) has established itself as the de-facto eSign standard, accelerating business transactions via their secure cloud-based platform with >450K customers globally, including >300 of the F500 and hundreds of millions of users. We see DOCU’s strong competitive positioning coupled with durable COVID tailwinds as helping it penetrate a $25B+ market oppy while traction of the Agreement Cloud drives long-term growth. However, with DOCU trading relatively in line with peers on an EV/S/Growth basis, these dynamics appear underappreciated.”

DocuSign Stock Price Forecast

Fourteen analysts who offered stock ratings for DocuSign in the last three months forecast the average price in 12 months of $308.77 with a high forecast of $389.00 and a low forecast of $215.00.

The average price target represents a 4.82% change from the last price of $294.57. From those 14 analysts, 13 rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $350 with a high of $487 under a bull scenario and $200 under the worst-case scenario. The firm gave an “Overweight” rating on the company’s stock.

Several other analysts have also updated their stock outlook. BofA Global Research raised the price objective to $360 from $250. Oppenheimer lifted the target price to $310 from $260. RBC increased the price target to $345 from $280. JPMorgan upped the target price to $300 from $255.

“We are raising our fair value estimate for narrow-moat DocuSign to $290 per share, from $207, based on strong results and guidance. DocuSign delivered another strong quarter, exceeding our above-consensus revenue estimates by a healthy margin. The company also provided strong guidance for the remainder of the year. It expects to continue on its path of high growth, fueled by strong user additions and upselling activity,” noted Dan Romanoff, equity analyst at Morningstar.

“Continued quarterly strength and continually increasing guidance gave us the confidence to sharply raise our growth and profitability forecasts. We think e-signatures and the Agreement Cloud, along with rapid international growth, are here to stay and that the financial performance is more sustainable than we were previously modelling. Still, shares have run over the last few months, and we, therefore, see the stock as fairly valued”

Check out FX Empire’s earnings calendar

DocuSign’s Stock Is Up 11% in July So Far

DocuSign, a modern-day technology company that supports electronic signatures, has been on a bull run this summer. The company also operates in the cloud and competes with the likes of Adobe. DocuSign’s slice of the digital signature pie is roughly 70% of the USD 25 billion market. The stock has proven to be more than just a one-hit-wonder whose business boomed during the pandemic.

DocuSign’s Stock

DocuSign shares have climbed 11% higher in the month of July alone. Digitization is only becoming more integrated into the lives of consumers and businesses alike. The role that digital agreements play in this paradigm, especially since COVID-19, could gain even more traction, which stands to benefit DocuSign even further. DocuSign performed especially well during the lockdowns when face-to-face meetings were replaced by remote working.

Pete Najarian, co-founder of Market Rebellion, pointed out some bullish buying in DocuSign options contracts. In particular, there is buying in the USD 310 calls expiring on July 23 compared to the current price of USD 306.70.

Meanwhile, DocuSign is one of the holdings in the ARK Innovation ETF. The stock ranks as the No. 14 holding, with a 2.75% weighting. DocuSign trades alongside high-profile companies in this fund, including the likes of Tesla, which is the top holding with a 10.14% weighting, payments platform Square with 5.12% and cryptocurrency exchange Coinbase with 4.27%.

While ARK still holds DocuSign, it has trimmed its position of late. Last month, Cathie Wood’s firm unloaded more than 107K DocuSign shares with a price tag of approximately USD 26 million. ARK Invest sold when the price was hovering at slightly above USD 240.

Future Outlook

DocuSign CEO Dan Springer was recently featured on The Drill Down podcast where he discussed the future direction of the company. Springer explained how DocuSign boasts more than 1 million customers and more than a billion people have signed their names on documents using the platform.

He says there was an acceleration in the company’s growth during the COVID-19 year. Even the U.S. SEC recently paved the way for companies filing their 10-K and 10-Q documents to do so using electronic signatures.

The company is looking to increase the wide-scale adoption of e-signatures and bolster the use cases for its technology. DocuSign has also moved into the cloud with its DocuSign Cloud offering, where it handles the management, storage and security of documents in addition to signatures.

Springer says that signatures will continue to be the “dramatic majority” of what drives the company’s business in the coming years. Nonetheless, the next chapter will be in the “agreement cloud,” he added.

DocuSign Bounce Could Offer Short-Term Profits

Nasdaq-100 momentum play DocuSign Inc. (DOCU) has fallen from grace in recent weeks, dropping more than 100 points below the Sept. 2 all-time high at 290.23. The steep downturn has relinquished 100% of the strong advance that started in early August, dumping the stock through the 50-day moving average for the first time since the first quarter’s pandemic swoon. Heavy selling volume has accompanied the decline, signaling a wholesale exodus by the momentum crowd.

DocuSign Rally May Have Exceeded Value

The stock took off for the heavens in March when Wall Street and market players realized the company’s digital signature technology would be essential during a pandemic in which businesses shut down physical offices and shifted into remote work and virtual meeting spaces. Rapid growth since that time has fueled an historic uptrend that some analysts now believe has exceeded the company’s long-term financial outlook.

Deutsche Bank analyst Taylor McGinnis expressed this cautious sentiment in a Sept. 4 note, downgrading DocuSign to ‘Hold’ from ‘Buy’ while maintaining a $225 price target. He acknowledged strong Q2 earnings and upbeat fiscal year 2021 guidance but expressed concern the stock had risen an astronomical 180% and had reached an unsustainable 26 times 2021 revenue. As a result, he believes the stock is now fully-valued.

Wall Street And Technical Outlook

Wall Street consensus hasn’t changed much since that bearish call, maintaining a ‘Moderate Buy’ rating based upon 9 ‘Buy’ and 7 ‘Hold’ recommendations. No analysts are recommending that shareholders sell positions and move to the sidelines at this time. Price targets currently range from a low of $210 to a street-high $300 while DocuSign closed out Friday’s session more than $15 below the low target. This humble placement suggests that analysts believe market players have been wrong in selling the stock.

Technically speaking, it looks like the initial selling wave of this correction is close to running its course, setting the stage for a strong bounce that will run into heavy resistance above 220. That price zone could offer a final opportunity for nervous shareholders to move to the sidelines because the highly-bearish volume pattern predicts the uptick will fail and potentially complete a head and shoulders topping pattern, with a downside target near 140.

For a look at all of today’s economic events, check out our economic calendar.

DocuSign Slumps Despite Impressive Earnings Beat

DocuSign, Inc. (DOCU) shares plunged 10.64% Friday despite the electronic-signature company sailing past earnings forecasts and lifting its second-half outlook on the back of companies requiring more digital signatures from a growing number of remote workers.

For the quarter ended July 2020, the firm reported adjusted earnings of 17 cents per share, crushing analysts’ estimate by a dime, and improving from 1 cent a share in the year-ago quarter. Revenues of $342.21 million also came in ahead of expectations and grew 45% year over year (YoY).

As of Sept. 8, 2020, DocuSign shares have a market capitalization of nearly $40 billion and trade 191.81% higher on the year. Gains have accelerated in recent months, with the stock adding more than 50%.

Looking Ahead

The company raised its guidance for the full fiscal year, saying it now expects sales of $1.384 billion to $1.388 billion, up from its previous forecast range of $1.313 billion to $1.317 billion. Meanwhile, it projects billings growth of around 40% in the second half, easing from a record 60% in the first half. “Customers have pulled projects forward. Whether that will continue will depend on whether everyone is still working from home. But we’re very bullish about the growth prospects for this business going forward,” CEO Dan Springer told Barron’s.

The company continues to move into other digital contract management areas, such as analytical tools that help businesses sort a repository of digitized documents. It’s also developing video-based notary solutions. The firm expects that 45 states could allow remote notaries as early as next year.

Wall Street View

Despite the stock’s sizable year-to-date (YTD) gain, analysts remain mostly bullish on the stock. It receives 9 ‘Buy’ ratings, 8 ‘Hold’ ratings, and just 1 ‘Sell’ rating. Twelve-month price targets range from as high as $300 to as low as $158, with the average price pegged at $250.26 – implying a 16% premium to Friday’s $216.26 close.

Technical Outlook and Trading Tactics

DocuSign’s share price staged a breakaway gap above crucial overhead resistance at $230 on Sept. 1 before promptly reversing below that level on heavy volume in subsequent trading sessions. The move indicates a possible head-fake trade that may give way to further profit-taking in the weeks ahead.

Those looking to buy the stock should look for entries near $136, where price finds support from a previous horizontal trendline and the rising 200-day simple moving average (SMA). Traders who expect a deeper retracement should monitor the $92.50 level, which is likely to encounter significant support from the February swing high.