I’ll admit it. As far as stocks go, Wayfair (NYSE:W) is not one of my favorites. DocuSign (NASDAQ:DOCU), on the other hand, has the makings of a 10-bagger. That’s why I recently included DocuSign stock amongst a group of 7 Hot Stocks to Stay Hot for Years to Come.
As an interesting aside, I also included Teladoc Health (NYSE:TDOC) and Livongo Health (NASDAQ:LVGO) on this list; They just announced an $18.5 billion marriage.
But I digress.
Wayfair’s stock is up 242.1% year to date through Aug. 11. When I suggested investors take profits in late May, it was only trading around $154, so if you listened to my advice, you missed out on $150 in further gains. My bad.
In my defense, I did suggest that I would be far more amenable to the stock if it were to make a profit. Well, it did just that in the second quarter, generating a GAAP profit (yes, you read that right) of $273.9 million on $2 billion in net revenue.
If I thought that Wayfair’s remarkable quarter was the result of incredible business execution or a spectacular product offering, I might be persuaded to consider its stock for the long haul. Alas, the novel coronavirus has made Wayfair’s management look like geniuses. It won’t last.
The only way I see this being permanent is if the new customers it gained during Covid-19 return for more once a vaccine has inoculated the entire country and brick-and-mortar retail returns to something closer to normal.
I see the customers DocuSign’s gained during Covid-19 as being far more “sticky” than Wayfair’s. Here’s why.
What’s DocuSign Gained?
As I stated in my July article about hot stocks that will stay hot, I pointed out that DocuSign is building a business that will be vital to the success of companies working from home.
“The company announced in the first quarter that it had almost 661,000 paying customers for products such as its eSignature digital signature and many others. As more companies move to a permanent work-from-home workforce, Docusign’s going to be a significant beneficiary of that transformation,” I wrote on Jul. 9.
Not only do products such as eSignature make things easier for businesses to do business virtually, but the company is building a modern-day equivalent of Adobe (NASDAQ:ADBE).
I get venture capitalist Fred Wilson’s daily blog post in my email every day. I like his stuff because he keeps the number of words to a minimum and, more importantly, on the subject. He’s a must-read.
Anyway, in his Aug. 12 message, he discusses his frustration with subscription agreements, lamenting the fact that despite all the technological advances in the past six-and-a-half years, he still has to fill them out.
“One great thing has happened on this issue in those six and a half years. Many/most subscription agreements are now sent digitally via DocuSign or Adobe,” Wilson writes.
“That’s great. It is certainly a bit easier to complete them online and once you have done that, there is no need to scan and email.”
During Covid-19, businesses and business people have found ways to keep transacting business while working virtually from home or wherever they’ve chosen to hang their hats. Companies like DocuSign are providing the tools to make this a permanent situation. More importantly, any time you have a business that makes or saves people time and money, you’ve got a winning formula.
Wayfair, on the other hand, is just another online retailer. It doesn’t sell anything particularly unique. It’s certainly not going to make you any money unless, of course, you bought its stock, but it does have those kitschy Kelly Clarkson ads.
In 10 years, I would be shocked if Wayfair is making more money than DocuSign.
The Bottom Line on DocuSign Stock
I’ve written for InvestorPlace going on nine years. In all that time, I’ve only written about DocuSign stock on two occasions. Both were in the past two months, both because of the company’s contribution to a post-Covid society.
As I said in June, DocuSign is an innovative stock to buy in the new normal. Wayfair, not so much.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.