DocuSign: High-Margin Growth Machine, That's Turning Around

My price target for DocuSign is $130 per share by summer 2026, supported by sustainable high-margin growth and a compelling risk-reward profile.

Investment Thesis

DocuSign (DOCU), the e-signature company, might not have fireworks around its name anymore as it once did. And that's a good thing.

The business reaches close to a rule of 40%. This means that growth of around 6% to 8% plus its free cash flow margin of around 33%, brings its rule of 40% to around 39% to 41%, making it attractive to institutional investors, less volatile, and thereby worthy of a premium on its stock.

Today, the stock is very attractively priced at 13x forward free cash flow. But best of all, its billings, which are a leading indicator of its future growth rate is expected to reaccelerate this year, the first time in 5 years, when its billings haven't been shrinking.

In conclusion, I reaffirm my price target of $130 per share by summer 2026.

Important Context

I stand by what I said yesterday about Liquidity Services—your portfolio needs to be built to survive.

The market is in a downturn, and the truth is, you never really know how long these things will last. Investing never comes with guarantees.

That’s why you need a few strong, growing businesses with attractive valuations. Let me say it again: you want companies with stable, predictable, and recurring revenues that generate high-margin free cash flow.

While I still believe that many fast-growing stocks have been unfairly beaten down, I don’t recommend trying to call the bottom. Don’t put more than 5% of your capital into any single position.

Why? Because survival is the key to investing. You can call it "risk management" if you want, but that just complicates the message. It’s all about staying in the game.

The problem with going all-in on beaten-down AI stocks (or similar plays) is that it puts you in a position where you need a recovery just to stay sane. That’s not a good place to be.

With that in mind, I’m highlighting DOCU as a top investment in my Deep Value Returns portfolio.