The security wipes out at least four price target reductions
The shares of Docusign Inc (NASDAQ: DOCU) rose 10.9% to $ 216.01 on its most recent review after the tech company reported earnings of 44 cents per share for the first quarter – higher than Wall Street’s estimated 28 cents per share. The company attributed the strong results to increasing customer growth. And although sales were just in line with forecasts, Docusign raised its outlook for the second quarter.
The brokerage group responds to the report. The security previously received no fewer than four target price reductions, including one from JP Morgan Securities from $ 271 to $ 255. Citigroup has raised its target price from 282 to 288 US dollars. Nevertheless, the sentiment of the analysts towards DOCU is optimistic, with 14 of the 16 in the reporting describing this as a “buy” or better. Plus, the 12-month consensus target of $ 269.94 is a 21.9% premium over current levels.
The security chopped off the charts last year, despite a bull gap that pushed stocks to a record high of $ 290.23 on September 2. After several months of struggling with pressure near the $ 260 mark, the stock fell. The 320-day moving average helped capture most of that negative price action, and now DOCU is testing its base at the 100-day moving average – a trend line the stock danced around in April. In a year-on-year comparison, however, the DOCU rose by 52.3%.
Additional tailwind could come from a shift in the option pits, which are trending downwards. This corresponds to the share’s 50-day put / call volume ratio on the International Securities Exchange (ISE), the Cboe Options Exchange (CBOE) and the NASDAQ OMX PHLX (PHLX), which is in the 81st percentile of their annual range. This suggests that long puts are being picked up faster than usual.
This shift seems to be already underway. To date, 66,000 calls and 27,000 puts have crossed the band, 13 times what is normally seen at this point. The most popular is the soon to expire 6/4 220 strike call, followed by the 225 strike call in the same weekly series, with both opening new positions. Buyers of these options expect even more upside for DOCU at the end of the day when these contracts expire.
Additionally, DOCU options are currently a bargain. The Schaeffer’s Volatility Index (SVI) of 54% for the stock is in the 15th percentile for the past 12 months, suggesting that option providers are now pricing in low volatility expectations.