Can DocuSign continue growth in a post-pandemic economy?

Nov 25, 2020

DOCU dropped 36% from all-time highs after it's last earnings release and has been trading between a 190 support level and 246 resistance level with most of the volume splitting the two at around 216. Earnings has consistently beat expectations and is in the triple-digit growth YoY. Sales growth has been above 34% for the last eight quarters and 45% for the most recent report. The question investors had after the last earnings is can DocuSign continue to grow or will the trend end with the pandemic.

The stock is grouped with other tech growth stocks like Zoom Video and Fastly which have been tagged as benefiting from the pandemic economy. When a viable vaccine was announced in the morning of 11/9, many of those stocks sold off in a massive rotation to Industrials, Travel and Energy stocks. However, the products and the business models for many of the "COVID stocks" are quite different. Will Zoom Video see its subscriber base go away after people can return to offices? Will social media and online content viewership decline, impacting Fastly's growth (more TikTok surprises)? And will a company like DocuSign continue to see growth after the pandemic is no longer an issue?

The digitization of contracts and esignatures are secular trends that were underway long before the pandemic hit. The pandemic has accelerated the adoption, but its unlikely that companies will go back to paper based methods after making a conversion to digital. So my view is that DocuSign would continue to see high customer retention that's been a strength of their business even before the pandemic.

The other strength that DocuSign has is upselling their full product suite to existing customers. You can imagine that many of the customer adds during the pandemic were to solve an immediate problem. Customers came for electronic signatures so they could continue to do business while lockdowns were in place. Now as DocuSign retains those customers, it also has the opportunity to put their upsell muscle to work.

It's always a gamble heading into earnings which is nine days away, but I'd consider a small position or an option if this could clear the current pivot high at 226.39 in the next 1.5 days of trading.

Current 10d ATR (x2.7) stop is at 9.79%.
Position size of R10.22 but would start with a smaller R due to earnings. And/or sell before earnings.

Buy Point: 226.39
Stop Loss: 204.23 (9.79%)
Position Size: R10.22

Dec 1, 2020

Note

This is the "net revenue retention" and upsell quote from DOCU last earnings call. I expect a different outlook message from DOCU on Thursday than ZM had today. But certainly the market can react either way. Position sized and stop in place.

Stan Zlotsky -- Morgan Stanley -- Analyst
Perfect. That makes a lot of sense. And maybe one for Mike. Mike, congratulations on the promotion to lead international.

And just on the quarter, net revenue retention, obviously very impressive, 120% result. How should we think about net revenue retention moving forward versus your more traditional 1 12 to 1 19 range? That's it for me.

Mike Sheridan -- Chief Financial Officer
Yes. Thanks, Dan. Yes. We obviously for the last couple of quarters have been at the higher end of that range.

Actually, this quarter, we exceeded it a little bit. I'm not going to update a guidance range for it. We will be upgrading that guidance range when we provide guidance for fiscal '22. But with that said, I think what we've seen in these recent quarters in terms of real strengthening around our dollar net retention and our ability to upsell into our installed base should keep us on the higher half of that range.

Contrast that with today's Zoom earnings call and the lower confidence around churn (retention):

Alex Zukin — RBC Capital Markets — Analyst
And then just as a follow-up, Kelly on churn, right, if you think about the cohorts and breaking down those churn rates and particularly on the consumer cohort. What is the assumption for Q4 and then as you go now, as you start to go into a more vaccine-led world, again, even when you do give guidance, it’s not like you’re going to have great, you are seeing some engaging trends globally from some regions that are in a different stage of the pandemic today, but what’s going to give you the confidence around those churn assumptions for next year?

Kelly Steckelberg — Chief Financial Officer
Yes, I mean we are taking an approach where we can’t predict the pandemic and so we are taking what we believe is a prudent approach. We do assume that the churn in the mass market, so the customers with fewer than 10, will continue to be elevated compared to both the pre-pandemic level that we saw as well as extremely level [Phonetic] that it compared to the upmarket segment of our customer base.