The world is moving to the “anywhere economy” where workers have the option to do anything from anywhere, and a key capability enabling this megatrend is the use of digital agreements and e-signatures. This week, we deep dive into DocuSign. Already the global leader in e-signatures, DocuSign are expanding their capabilities to support the entire life cycle of a digital agreement with their Agreement Cloud suite of services.
- The pandemic has accelerated the move to digital agreements and electronic signatures, but the transition had already been in progress for many years. Countries have enacted legislation for the use of electronic signatures in legally binding agreements, including the U.S. Electronic Signatures in Global and National Commerce (ESIGN) Act in 2000 and the Electronic Signature Law of the People’s Republic of China in 2004.
- The digital transaction management market is currently estimated to be worth $50B, and DocuSign has 70% of the e-signature market. Research has shown that on average $36 is saved per agreement just from using e-signatures. Digital signatures are more secure and are easier to prove authenticity. Digital documents are easier to store, organise, search and analyse. Customers who see the benefits of having their agreements signed and managed digitally are unlikely to go back to paper. And with over 350 integrations with other systems, such as Microsoft, Google and Salesforce, customers can more easily integrate DocuSign into their existing processes and workflows.
- With their ‘Agreement Cloud’, DocuSign aims to support the entire lifecycle of digital agreements, from preparation to signing, execution and ongoing management. Strategic acquisitions have bolstered their capabilities in each of the stages. The acquisition of Seal Software in 2020 brought in the use of AI to analyse digital contracts; LiveOak in 2020 brought in online notarization, a service they released earlier this year; DocuSign also acquired Clause in 2021, with the aim of enhancing digital contracts into “living documents” with interactivity and digital functionality.
- DocuSign has grown its paying customers from 54,000 in 2012 to 892,000 by the end of 2020, representing a CAGR of 42%. They now have over one million paying customers with over one billion users in over 180 countries. Customers come from a wide range of sectors, from financial services and real estate to life science and government, with over 90% of Fortune 500 companies using DocuSign.
- Competitors in the e-signature space such as Adobe Sign and HelloSign (owned by DropBox) have largely stayed out of the market of contract lifecycle management. Adobe in particular has stated they do not want to be the system of record for documents. DocuSign is betting that businesses see value in having an ecosystem for digital agreements. The company has grown from a $4.4B market cap to $54B in just over three years, suggesting that they’re on the right track. CEO, Dan Springer estimates that the company is still less than 10% penetrated in its market.
- Their Q1 revenues for this year reached $469M, 7.6% higher than their own estimates just a few months ago, indicating higher demand for their products than even they expected. Full-year revenues are expected to reach $2B this year. GAAP gross margin increased 75% in the same period last year to 78%, while the dollar-based net retention rate (DBNRR) was 125%, demonstrating the value they are adding for existing customers. DocuSign raised $690M through a sale of convertible senior notes earlier this year, strengthening its cash position to $876M.
If you enjoyed this episode, please subscribe to the Telescope Investing podcast at Spotify, or on your podcast platform of choice
Transcript
Albert: Hi, this is Albert.
Luke: And this is Luke.
Albert: Today is Monday the 28th of June.
Luke: Welcome to the Telescope Investing podcast.
Intro
Luke: You know, Alb, I’ve been hanging out with my friend and his girlfriend for a couple of days, and you know what we did on Friday? Rachel had to sign an NDA for a new company she was planning to join and you know what they sent her? A ton of paperwork to print out, sign, scan, and then email back to them. And as I showed up on Friday, she was trying to fathom her way through this horrible process.
Albert: I guess you’re leading us into the company we’re going to do a deep dive on this week, DocuSign.
Luke: Exactly. How would DocuSign have helped Rachel with her NDA signing?
Albert: I assume she wouldn’t have needed to receive that huge pile of paper and had to scan that in to send back to the company.
Luke: Exactly right. Sadly, the company she’s planning to join are not DocuSign-enabled yet but our model portfolio is. We’ve had DocuSign in it since 2020 and it’s also a key feature in our 2021 portfolio.
Albert: And I believe we both have it in our own portfolios. I currently have around 1%.
Luke: DocuSign’s been a real commitment holding for me for some time. I’ve bought it twice and I’m currently sitting on around 4%. I’m going to use today’s podcast episode to try and persuade you to increase your position.
Albert: I don’t think you need to do that. I think I’ve gone through the notes and I’ve already convinced myself.
Luke: Well, let’s see how we get there, should we?
Background
Albert: Yeah, let’s get straight into it, Luke. I think most people recognize the name DocuSign as the e-signature company, and this was founded in 2003 by three people, Court Lorenzini, Tom Gosner, and Eric Ranft. As far as we can tell, these three people are no longer associated with the company, and a guy called Dan Springer took over around 2017. And he took the company through its IPO in April 2018 and it IPO’d at around $29 for a valuation of $4.4 billion, but the stock started trading at $38 on the first day of trading and the share price is currently around $279, over seven times from the IPO day.
Luke: Yeah, their current market cap’s about $54 billion. And they’ve got a price-to-sales ratio of 32, so that makes them actually fairly richly valued. I could understand why some investors might be hesitant to open a DocuSign position at that valuation.
Albert: And as you alluded before, DocuSign deal in e-signatures. They’re actually the global leader in e-signatures with around 70% of this market, but I would say this is just a tip of say, the fountain pen of their ambitions. I think their vision is really embodied by what they call the Agreement Cloud, which is a suite of digital services to manage the full lifecycle of business agreements from preparation, signing, execution, and ongoing management.
Luke: And I think that Agreement Cloud vision is really what differentiates them from their key competition, Adobe and HelloSign. DocuSign refers to these capabilities as digital transaction management and also contract lifecycle management.
Albert: Yeah, I think e-signatures gets customers through the door and then they stay for the time-saving and cost-saving digitals contract management tools that DocuSign offer.
Tailwinds
Luke: So we always like to start off our stock deep dives with a reflection on tailwinds. What are the macro secular trends that are supporting an investment and lifting up all companies in a particular sector?
But I guess for e-signatures, it’s the pandemic. That’s the big one, right? That’s brought forward so much growth. Remote working under COVID has forced everybody to work from home and it’s forced paperwork to go electronic.
Albert: They announced their plan for the Agreement Cloud in late 2019, which is really lucky timing as the pandemic hit in early 2020, and the acquisitions and the work they’ve been doing during the past few years really set them up to ramp up quickly as remote working became the norm.
Luke: Yeah, I think I saw a quote from the CEO, Dan Springer. He said recently, “Overall, the response to COVID-19 has caused organizations to accelerate their digital transformation efforts by two, three or four years or more.”
Albert: Yeah, but the move to digital agreements and e-signatures has been progressing for years and the pandemic accelerated it, but it was likely going to happen anyway.
Luke: Yeah. I was chatting to my friends the other day about e-signatures and about DocuSign, and Jason asked me, are these things actually legal? Do you need wet signatures for anything these days? DocuSign and its competitors are widely accepted, certainly in most of the Western world. In the US and the UK, an electronic signature is as good as a wet signature.
Albert: Yeah, many countries have enacted legislation for the use of electronic signatures in legally binding agreements. I think both DocuSign and Adobe summarize the legality of e-signatures in each country on their websites. For example, the US ESIGN Act was enacted in 2000 and this legislated that electronic signatures are legal in every state and US territory where federal law applies. And another country that has seen increasing use of electronic signatures is China and their law, the Electronic Signature Law of the People’s Republic of China, was first published in 2004 and was last amended in 2019.
Luke: And, you know, it’s not just easier to sign documents. It’s easier to store documents when they’re electronic.
Albert: Yeah, this reminds me, I got myself a document scanner and a paper shredder a few years ago and I digitized almost everything. And it’s much easier to find documents now and search the text for things I’m interested in, and there’s just less junk in the house now. And I try to imagine how did people find information in paper documents? I guess some poor interns just had to read them.
Luke: It must be expensive, complicated, and messy to have to deal with piles and piles of paper. I did the same thing personally. I took all of my paperwork into the office one day years and years ago, and use one of our fast scanners just to turn it all into a bunch of PDFs. Actually, the office building I used to work in used to be one of my bank’s cheque processing centres. And I guess cheques are just another example of pieces of paper that we’ve now largely digitized, but we had lots of people whose job it was to sort through mail sacks every day, open the envelopes, pull out the cheques, run them through scanners so we could process people’s payments.
Albert: I can’t remember the last time I used a cheque and really, I can’t believe that handwritten signatures or so-called wet signatures are still being used. Surely, they’re really easy to fake. And I think I talked about this in an earlier podcast where I got my wills done last year, and I did this through a will preparation service and when we came to signing the wills, I remember apologizing for the fact that my signatures looked different each time I signed. And the person helping me told me, don’t worry about that, that’s the reason why you have two witnesses.
Luke: Same, Alb, I forgot how to sign my signature last year after being so out of practice. And actually, I remember going to a bank branch locally to draw out a ton of cash to pay for a big purchase, and I had to go through stacks and stacks of ID because I just could not sign my signature in a way that the bank would agree it was me.
Albert: Actually, I would like to give a shout-out to the will preparation company that helped me, Phoenix Wills in Hong Kong. They were really helpful and I don’t think I could have done it without them.
Luke: Very good. Who were your two witnesses?
Albert: One of them was the owner of Phoenix Wills, a nice lady called Asa, and the other one was one of our mutual friends, Renee.
Luke: Maybe now Asa and Renee know that you can’t sign your own signature, they could re-witness a different version of your will and bequeath everything to themselves.
Albert: I guess they could but I don’t think that will be worth their while!
Luke: Well, they might get your 1% DocuSign holding. You know, customers who see the benefits of having their agreements signed and managed digitally won’t go back to paper ever.
Albert: Yeah, it’s such a no brainer that I wonder why it took me so long to invest.
Luke: I remember DocuSign coming to my attention during the pandemic middle of last year and it did just seem so obvious. I’ll be honest, the stock hasn’t performed brilliantly well compared to other stuff in my portfolio, but this definitely feels like a long burn with a long way to run.
Albert: I think one of the reasons why that is, Luke, is because we got it in quite late. From IPO day, it has increased over seven times and I think we just got in a bit late with our investments.
Luke: Well, better late than never. You can’t sit on the fence forever with some of these things.
Albert: I think we’ll get into this when we come to the total addressable market but I think they have a lot of room to grow. I think this is just a start of a very long runway. Also. I like to add that even when a company has gone digital in some parts of their workflow, I think there are huge benefits in having all the stages connected so that they all work together as seamlessly as possible. I saw that DocuSign has over 350 integrations with other platforms and systems such as Microsoft, Google, Salesforce, and SAP.
Luke: Yeah, there’s loads of problems with wet signatures that having e-signatures and having that whole agreement workflow can solve. Without those capabilities, stuff just costs more. It’s much more subject to human error and rework.
Albert: I remember seeing in some of the documentation that DocuSign claim customers save on average around $36 for each agreement that uses e-signatures and don’t forget, it’s also saving the trees that would have been used to make that paper.
Luke: Yeah, great point. You mentioned it before but digital signatures are far more secure and far more robust when you’re proving authenticity. When you DocuSign a document, it’s not just the picture of the scribble on the page, it’s capturing your IP address, your device, your GPS location, how long it took you to sign it, loads of other telemetry that helps DocuSign validate that you really are you.
Leadership
Albert: So we mentioned the CEO was a guy called Dan Springer. Yeah, he’s been CEO since January 2017 and before he joined DocuSign, he had led a company called Responsys from 2004 to 2014. And Responsys is a provider of email marketing software and was acquired by Oracle in 2013.
Luke: We always go straight to Glassdoor when trying to assess the quality of leadership and what the culture is like in a company. DocuSign has got some pretty stellar numbers. Overall, the company gets 4.6 out of five and 98% of employees approve of their CEO.
Albert: Yeah, this is one of the best Glassdoor ratings we’ve seen and a lot of the reviews praise the culture and excellent work-life balance there. I think it’s just driven by Springer’s own experience as a single dad when he decided to take a break prior to joining DocuSign to look after his children.
Luke: I did note though, headcount has grown massively in the last year. They’re up nearly 40% to 6,000 employees. And I suppose when a company grows so fast, there’s a danger to the culture.
Albert: Maybe this growth reflects how much business they’re bringing in and how much growth they’re expecting over the next few years.
Luke: Yeah, we’re going to pick it up a bit later but they’re investing hard in R&D and acquisitions. And as they buy new companies, I guess they need a bunch of really smart folks to integrate those capabilities with their core product.
Albert: And we had a look at the insider ownership for DocuSign and it’s quite low. The CEO, Dan Springer has around 0.8% and the other insiders have an additional 1%, but this is not to surprising as they are not founder operators.
Luke: Yeah, normally insider ownership that low might be a bit of a red flag, but I think I might give DocuSign a pass on this one given the leadership history.
Total addressable market
Luke: You mentioned total addressable market earlier. Let’s get into that. It’s a really key metric. How big can they get?
Albert: Well, ask yourself the question, who are the customers for digital transaction management? And the answer is basically everybody, businesses of all shapes and sizes and also the customers of those businesses.
Luke: Yeah, I remember seeing a CEO quote from Dan Springer where he described himself as very bullish and estimated the company was well less than 10% penetrated in its market.
Albert: Some people estimate that the digital transaction market is worth around $50 billion now.
Luke: I guess that’s the market today and I suppose, as Dan’s thinking, if every legal document in the world is your market, your market’s huge. I think there’s a tiny proportion of documents that are electronic today.
Albert: And I think the key differentiator for DocuSign is their concept of the Agreement Cloud, which is a suite of services for managing the complete life cycle of a digital agreement. The Agreement Cloud services are grouped into four buckets, one for each stage in the agreement process. The first stage is preparing the agreement, followed by signing the agreement, then executing the agreement, and finally, the ongoing management of that agreement.
Luke: Yeah, I think it’s pretty smart. I mean, you do have to buy into this concept of the Agreement Cloud and all this workflow around storing and managing your document lifecycle, but as an investor, if you agree that that’s a capability that companies are going to want, well, DocuSign of a leader by a long way.
Albert: And I’ve heard rumours that one risk to DocuSign is the emergence of blockchain. Could that replace DocuSign? It’s interesting to see that DocuSign has been exploring the use of blockchain already. I believe they started this in 2015 in collaboration with Visa, and I believe now DocuSign is a member of the Enterprise Ethereum Alliance, which is a group of industry leaders working together to find blockchain-based solutions.
And I think now for customers who want it, evidence of a DocuSigned agreement can be written to the Ethereum blockchain, which acts as a neutral source of truth and anyone with a copy of the agreement can check against that blockchain to verify it.
Luke: I get the use case but I also remember seeing a quote from Dan Springer last year where he felt that blockchain was too slow and too expensive if they were going to migrate all their contracts onto it. I guess though, they’re now positioning this as an option for customers who want those capabilities.
Albert: This could be an indication of where things would go in the future. After reading this, suddenly Ethereum has become a much more attractive potential investment.
Luke: Yeah, I agree. I do think cryptocurrency’s got a role in a balanced portfolio, and I definitely feel like Ethereum has more real-world utility than most other coins. Most of my crypto is Ethereum.
Albert: And it seems that DocuSign has now become a verb to mean digital signatures and this represents the mindshare the company has in this space. And I think I’ve mentioned this before in an earlier podcast, that I was kind of surprised to hear DocuSign used in a film on Netflix, an otherwise forgettable film called Love Guaranteed.
And it’s interesting that the screenwriters use DocuSign expecting the audience to know what they mean and note they didn’t use the word Adobe Sign or HelloSign.
Luke: You know, my main takeaway from that statement, Albert, is that Love Guaranteed must be a pretty tragically bad movie. You’ve got a well-known very low bar for poor movies, so if you think this is bad, it must be terrible.
Albert: Obviously, that has now made people want to watch it.
Customers
Luke: Let’s talk about DocuSign’s customers for a bit because they’ve been on a really great growth trajectory over the last few years. They’ve grown their customer base from 54,000 customers in 2012 to 988,000 customers worldwide at the end of April this year.
Albert: And they are still gaining customers and from their website, I saw that they now boast 1 million paying customers and over a billion users in over 180 countries that use DocuSign. And this includes 13 of the top 15 Fortune 500 technology companies, 14 of the top 15 Fortune 500 healthcare companies, and all of the top 15 Fortune 500 financial companies.
Luke: Yeah, they’re pretty well embedded being used across the industry. They’re definitely becoming a standard.
Albert: Yeah, and they have customers in a wide range of sectors from financial services and real estate to life sciences and government.
Network effects
Luke: So a big gold star for customer growth. That’s looking really. One of the other lenses we like to look at are network effects. And I think there’s a really interesting quote from Dan Springer in their latest earnings. He said, “Ultimately, over the coming years, we think the trend will continue toward the option of doing anything from anywhere. We call the products and services supporting this trend the anywhere economy. We believe we’re a key pillar and it’s only just beginning.”
Albert: We have remote working as one of our megatrends, Luke. Maybe we should rename this to the anywhere economy.
Luke: Yeah, I agree. It’s a great term, actually. I’ve not heard it before and it’s much more accurate than calling something work from home, or as you say, remote working. Digital natives these days are location-agnostic and I think the best companies in the world are going to have to adapt to support that.
Albert: Well, not only that, Luke, imagine you’re a business and the company you’re a with asks you to use DocuSign and you experience firsthand how quick and easy it is. You may decide to start using DocuSign as well and then the other companies that you’re working with will see that you’re using DocuSign and so on. I think this is a really strong network effect with potential exponential growth.
Luke: Yeah, and just like the net promoter aspect as well, right? I’ve recently sold a rental property and I went out of my way to find a conveyancer that used electronic signatures and had workflow around the process.
My friend Jason is selling his house but he went with a cheaper option, and we are chatting about the paperwork he’s had to do for his house sale. He described it as just nuts. He’s had 12 documents in just in the last few weeks that he’s had to print, sign, scan, and then when he emailed the company to complain, they sent all these documents as Word format and then he had the pain of trying to get a signature photo into the documents so he could generate PDFs. It was still just as painful.
Albert: Yeah, I remember selling my flat a few years ago, and my flat was in London and I live in Hong Kong and we had documents sent back and forth between Hong Kong and the UK and the whole process took maybe a month. And if we had DocuSign, it could have been done in an hour.
Optionality
Luke: You know, for me, Albert, the most exciting part of the DocuSign story I would say comes under the Telescope lens of optionality. It’s the story of all the acquisitions and new capabilities they’ve rolled out over the last two years or so. Let’s whiz through a few of them because some of them are really fascinating when you think about that contract management life cycle.
So I’ll just go back to February 2020 when DocuSign acquired a company called Seal Software for $188 million. That seems like a bargain in retrospect. Seal Software were one of the leaders in contract analysis and applying machine learning techniques to understand contracts and provide, basically, the same kind of advice that a paralegal would, but doing it through machine learning by understanding the contract.
Albert: And I think this is now available in the Agreement Cloud as their Insight service.
Luke: I actually had a chance to experience it through my job earlier this year. It’s pretty powerful. We are able to analyze tens of thousands of contracts over the course of a couple of days and understand the scope of some contract changes that we are planning to make across a large number of suppliers.
Albert: And I see they acquired a company called Live Oak in July of 2020, and this is the company that provides online notarization and DocuSign has released a notary service early this year that allows a notary public to act as an in-person witness to the electronic signing of agreements.
Luke: Yeah, this is super exciting as well. I’ve had to use a notary a couple of times in the past and it’s a pain in the back. You have to go and make an appointment at their offices. You have to go in person. They have to witness your ID. If you could do all this over, basically, Zoom with a DocuSign-enabled contract, that’s a huge time-saver.
Albert: Yeah, and I believe the CEO, Dan Springer explained during the DocuSign analyst day last month that its customers were eagerly awaiting the arrival of this notary service.
Luke: We’ll bring some of that R&D a bit more up to date. In March 2021, they rolled out their e-witness capability. I guess it’s building on that Live Oak notarization to allow your witnesses to sign a document without you all having to be in the same place physically.
Albert: And in May of this year, they acquired a company called Clause, and Clause was founded around five years ago and it developed systems to assist digital contractual agreements, such as user verification and industry-specific services, such as real-time data-driven insurance contracts. The system aims to enhance digital contracts from just digital copies of paper documents into living documents with interactivity and digital functionality. This sounds a bit like archivable web pages or even editable PDFs on steroids.
Luke: Yeah, you can see that real range of powerful capabilities they’re adding into this workflow. It’s got to be exciting for their customers where they can see how they can optimize their own businesses using DocuSign’s capabilities.
And I note that DocuSign raised $690 million through a convertible note in January this year, and they still got a chunk of cash on their books. I think that hints of future acquisitions and heavy R&D investment in the months and years to come.
Competitors
Albert: And in a market as big as this, you can expect some competitors. DocuSign have quite a few. Some of their competitors are SignNow, Adobe Sign, GetAccept, HelloSign, and Zoho Sign. But I think the two most recognizable ones are Adobe Sign and HelloSign.
Luke: And you pulled down the Gartner magic quadrant for contract lifecycle management. Adobe and HelloSign don’t even feature on that. They’re just not going after that part of the market. DocuSign are in the leadership quadrant and if you look at their competitors, they’re much smaller companies with a far less complete vision.
Albert: I guess, for basic e-signatures, there’s very limited differentiation between different services, such as DocuSign, Adobe and HelloSign, and the real differentiation will come from the ecosystem around those e-signatures. Maybe this is the reason why DocuSign has around 70% of the e-signature market.
Luke: Yeah, there was an interesting quote from Adobe in the last few months. A representative of the company was quoted as saying, “It doesn’t want to be the system of record for documents. Our strategy of thinking more holistically about the document has been a good strategy where, as we look back, I don’t think we’d change that focus. Where DocuSign has gone is around this system for agreements and that’s the piece that I just haven’t seen customers gravitate towards.”
It’s interesting, isn’t it? How these two giant companies in the same space see the market so differently
Albert: But given DocuSign’s huge growth in this area, I think the case is on DocuSign’s side.
Luke: Yeah, I think so, and we’re going to see that in some of the numbers we’re going to look at when we get to the financial section.
Financials
Albert: And speaking of financials, Luke, we had a look at the latest earnings released at the start of June, and the total revenue for the latest quarter was $469 million, an increase of 58% over the same period last year.
Luke: Yes, subscription revenue was a massive piece of that at $452 million, an increase of 61% year-over-year.
Albert: And what was really impressive was that their GAAP gross margin increased from 75% last year to 78% this year. They are becoming more efficient.
Luke: Exactly. The stat that really caught my eye though was their DBNR, their net dollar retention. That’s now 125% and it’s been north of a hundred percent every quarter and growing every quarter going back the last couple of years. What that means is every customer each quarter is spending more and more money with DocuSign. That’s a real testament to the power of the product and the fact that their customers love using them.
Albert: And one of their main areas of growth is international growth, and it was really good to see that their international growth in the last quarter was 84%.
Luke: I mentioned the cash they had on their books. Well, they were free cash flow positive to the tune of 123 million in the last quarter compared to just 32 million in the same period last year. And now they’ve grown their cash pile to nearly $880 million.
Albert: And their earnings are higher than what they expected just a quarter ago. At the end of Q4 last year, they were guiding for revenue around 436 million by the end of Q1, which is around a 1% quarter-on-quarter growth, but they actually delivered 469 million, a 7.6% beat over the guidance. They’re now guiding for a four-year revenue of almost $2 billion.
Luke: They’re really solid numbers. I’ve got no bones to pick in their financials at all. It’s robust.
Key takeaways
Albert: So what are the other key takeaways, Luke?
Luke: Yeah, exactly. Let’s turn back from the company and sum it up. Their earnings were great. Revenue’s accelerating, dollar-based net retention at an all-time high and continuing to grow, international growth is huge, gross margins are increasing. A really solid financial picture.
Albert: Yeah, I think DocuSign was wrongly pegged as just a COVID stock, which may be one of the reasons why it dropped at the start of this year. The pandemic has definitely accelerated the move to digital and brought forward future growth and growth rates may be difficult to match those of 2020, but I think there’s still plenty of room to grow and hopefully, DocuSign will capture more and more of this growing market.
Luke: I think we’ve got to keep that quote from Adobe in our minds. We’ve got to challenge ourselves around the Agreement Cloud. If that doesn’t land with customers, if they’re just not interested in having that contract lifecycle, there may be DocuSign are investing in the wrong way, but it definitely feels like it’s DocuSign’s race to lose at the moment.
Albert: Yeah, I agree with you, Luke. I think DocuSign is on the right path. Convenience is a game-changer in any business. That’s one of the reasons why Amazon is so successful – because they make shopping so convenient. And if DocuSign can do the same thing for business, that could really push their growth even faster.
Luke: Let’s bring together our key takeaways with what are we going to do. I think we know the answer to this one already. I’m sat on a 4% allocation and actually, I’m pretty comfortable with that. I’m going to leave that in place for the foreseeable future.
Albert: I have a 1% allocation and the stock has been quite volatile in the last six months as investors have flip-flopped on growth stocks. But I really believe that it’s a relatively safe bet that digital agreements are here to stay and DocuSign will be one of the main providers of this function. And I’m looking at increasing my allocation over the coming years.
Luke: Yeah, you mentioned pre-episode how you’re going to free up the capital to fund your increase in DocuSign, but why don’t you tell our listeners.
Albert: I’ve been considering selling my stake in TripAdvisor. I was hoping that TripAdvisor’s stock price would recover and I wouldn’t have to sell at a loss, but it doesn’t seem to be happening. So I might have to accept that loss and drop it anyway.
Luke: You and I have been investing for nearly 20 years each, but it’s still very hard to break the habit of price-fixing. I know you’ve had your eye on that price you paid for TripAdvisor and hoping you can get your money back.
Albert: Well, I keep hearing all these stories about a rebound in travel and some travel stocks have recovered, but unfortunately, TripAdvisor has not. And I always have this fear that the day after I sell, the stock price would recover and I will miss out on that recovery.
Luke: I don’t think they’re going to make a big recovery. You know, I sold my TripAdvisor stock when I suddenly realised that as an investor, I was using TripAdvisor to plan my vacations, but I was still booking everything on the regular travel sites. TripAdvisor just weren’t getting any of my revenue. I was a shareholder. If they weren’t getting my revenue, probably not going to get anyone else’s either.
Albert: Yeah, I guess their only revenue is online advertising, and I think I read earlier this week that Facebook, Amazon, and Google have 90% of the online ad market and the remaining 10% is shared by everybody else.
Luke: No surprise at all there. Well, I think that’s a good trade, Albert, swapping out TripAdvisor and maybe a few other things for a bit more DocuSign.
Albert: Actually, do you know who is the fourth biggest player in online advertising?
Luke: Uh, The Trade Desk?
Albert: It’s actually Microsoft with Bing.
Luke: Oh wow. Cool. Very good.
Albert: They have revenue of $9 billion just from Bing.
Luke: I guess I was thinking about it the wrong way with my Trade Desk guess but did Apple not make the cut anywhere?
Albert: I don’t believe so. I believe Twitter is number five.
Wrap
Luke: But speaking of Twitter, if there’s a future topic you’d like us to cover, you can message us on Twitter. I’m @LukeTelescope.
Albert: And I’m @AlbertTelescope, or you can email us at feedback@telescopeinvesting.com.
Luke: If you enjoyed today’s episode and maybe you’re going to pick up a bit of DocuSign for yourself, you can find more content at our website, telescopeinvesting.com, where you can leave us a comment or a review.
Albert: And if this is your first time tuning in, perhaps consider subscribing to the website so that you’re the first to hear about new articles and episodes as they drop.
Luke: Thanks, Albert.
Albert: Thanks, Luke.
1 comment