Recently eSignature player DocuSign (Nasdaq: DOCU) announced its third-quarter results that surpassed market expectations. But its outlook for the fourth quarter was disappointing, which sent its stock down by more than 40%.

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DocuSign’s Financials

Revenues for the third quarter grew 42% to $545.5 million, ahead of the market’s estimates of $529.3 million. Billings grew 28% to $565.2 million. Non GAAP net income was $0.58 per share, compared with the market’s expectations of $0.46 per share.

By segment, Subscription revenues grew 44% to $528.6 million. Professional services and other revenue grew 4% to $16.9 million.

For the fourth quarter, DocuSign forecast revenues of $557-$563 million, compared with the Street’s forecast of $573.8 million. DocuSign expects to end the year with revenues of $2.083-$2.089 billion compared with the market’s forecast of $2.08 billion. Its weak fourth-quarter outlook sent its stock spiraling down 42% in the after-hours session.

DocuSign’s Agreement Cloud Growth

DocuSign estimates the agreement cloud opportunity to be a $50 billion market with digital transformation remaining a high priority for organizations worldwide. It is focusing on expanding its market presence through partnerships. It recently announced an expansion of its partnership with Salesforce. As part of the expanded agreement, the two will be able to create new joint solutions that make it easier for customers to accelerate how agreements are facilitated globally. New innovations will enable the contract process to be automated with AI-based smart solutions, thus improving the customer experience of preparing, signing, and managing agreements. The solutions will help drive faster ROI and increase collaboration throughout organizations with Slack functionality.

It is also increasing the investment in a global sales capacity, training, and field enablement to accelerate pipeline generation. It is also stepping up its marketing investments across direct and channel sales to drive brand awareness and qualified sales leads, both domestically and in the international markets.

It continues to improve its product offerings by releasing several enhancements. Last quarter, it added several new features to DocuSign CLM to help organizations automate manual business processes and improve efficiency with every agreement. Earlier this month, it launched a full set of collaboration tools within the product to give users the ability to comment, tag others, and assign tasks in the CLM UI. Within Agreement Cloud, it added new agreement actions with Google and Microsoft apps to automate the post-signature tasks, new delegated signing capabilities for enterprise customers, and new tech to simplify invoicing using DocuSign Gen for Salesforce billing. For the recently launched DocuSign Notary, it added the capability for administrators to manage the availability of first-party notaries.

Recently, DocuSign also announced the launch of DocuSign Ventures, its new initiative that focuses on co-investing in and partnering with companies that are raising early-stage funding to innovate around the agreement process. By working closely with emerging startups, DocuSign hopes to be able to help its customers with the ability to identify and integrate new solutions such as technologies that facilitate pre-agreement work and negotiation and handle logistics and workflows that result after a signed agreement.

The market is not very pleased with DocuSign. Its stock is trading at $144.88 with a market capitalization of $27.66 billion. It had fallen to a 52-week low of $131.51 in November. It had climbed to a high of $314.76 in August.

I think it is a great buying opportunity for the stock.