DocuSign (DOCU) reporting earnings on Thursday 6/3 after the close with the Street looking for $0.28 on $437.8M in sales. Next quarter is guided to $0.29 and $473.68M while the FY is $1.31 and $1.98B. Shares have closed lower in three of the last four and over the last two years have had an average closing move of 9.68% and a max move of 21.66%. The current implied move is 6%. On the chart, shares back near support of a long range around $180 but forming a series of lower highs since February and key to move back above $230. A run higher can spark a big move back to recent highs. Shares are back above VWAP from the March 2020 lows but below $180 is a decent low-volume gap back to $155.

The $38.79B company trades 19.8X EV/sales with high-20% growth expected in both FY23 and FY24. DOCU is also ramping profitability and should earn over $1.85/share by FY24. DOCU sees a long runway for growth within the market for esignatures and contracting workflow with just 8% market share. They gained a lot of popularity throughout the pandemic as cloud-based signatures for critical documents became essential and the shorter contract execution cycle will likely keep them in-demand even as work environments shift back. They continue to add new products too which will expand their reach with both Notary and Analyzer debuting in the 2H of 2020. DOCU is especially early in the days of selling the latter but could be a strong cross-sell opportunity in 2021.

Analysts have an average target for shares of $274 with a Street High $325. Wolfe starting at OUtperfom on 4/22 noting that e-signature is potentially the stickiest of the Work 2.0 technologies and he sees a long runway for growth with limited competitive threats for DocuSign. BAML with a $250 PT for shares and a Buy rating noting that there’s a $24B opportunity in document management and they’ve built a nice moat and large installed base to continue growing. DA Davidson positive in March seeing a pathway to $5B in revenue as DocuSign’s Agreement Cloud positions the company well to address the wider agreement process market while the less mature international markets present additional growth opportunities. Short interest is 3.25%. Hedge fund ownership fell 1.7% in Q1. Options flow has been bullish with 1,500 weekly $200 calls bought recently and put sales popular across many months and strikes.