2 Tech Stocks To "Buy The Dip" For 2021

While many critics believe that the growth story is over with vaccines getting ready to roll out, I would argue this isn’t the case at all. This is because DocuSign saves businesses both time and money by avoiding travel and appointments, and there’s no reason that this is going to change just because people can meet face-to-face again. Meanwhile, the 55% growth in enterprise & commercial customers is not likely to suddenly erode just because of promises of a vaccine. Enterprises tend to make decisions with years of planning in mind, not weeks, and DOCU is firmly positioned as the leader in the E-Signature space.

Graphical user interface Description automatically generated

(Source: YCharts.com, Author’s Chart)

As shown in the DOCU’s earnings trend, the company has had explosive growth, with FY2020 annual EPS up over 200% and FY2021 annual EPS expected to grow by 85% ($0.58 vs. $0.31). These are incredible metrics given that the company is lapping a year of triple-digit growth. If the company can meet FY2023 forecasts of $1.72, it will boast one of the highest compound annual earnings growth rates in the market of over 109% ($1.72 vs. $0.09).

While some investors might be writing the company off as it looks extremely expensive at over 700x FY2020 annual EPS, it’s important to note that the market is already looking ahead to FY2023 given that DOCU is getting ready to report its fiscal Q3 2021 earnings this week.

Based on annual EPS of $1.72, the stock is trading at only 130x earnings, which is actually quite reasonable for companies with a compound annual growth rate of over 100%.  However, to bake in a margin of safety, I see the low-risk buying opportunity for the stock on any dips below $205.00.

This is where the stock should find support near its 200-day moving average and the bottom of its current base. As we can see in the chart below, DOCU broke out of a massive base last year, ran up over 200%, and is now building its first real base since its blow-off top in Q3. The best-case scenario would be another couple of months building a base here, and then a breakout in Q1 of next year as the stock would have digested its recent parabolic advance

View single page >> |

Disclosure: I am long FB

Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.