Read an interesting stat today.
Typically in any given year there are 1 million new market participants.
Since Covid lows there have been FOURTY MILLION new market participants which is effectively more than 39 million gamblers
This is the reason that many stocks reached ridiculous highs never to be seen again and nearly all without exception will revisit Covid lows.
Those gamblers may well turn into short sellers and a powerful bear movement
Gowth stocks that fail to meet agressive growth targets will get severely punished
By John Foley
NEW YORK, Dec 3 (Reuters Breakingviews) - It’s always the small print that carries the sting. DocuSign’s shares plunged by 40% on Friday, after it warned https://investor.docusign.com/investors/press-releases/press-release-details/2021/DocuSign-Announces-Third-Quarter-Fiscal-2022-Financial-Results
that demand for its e-signature software had slowed faster than it expected. The market’s response is dramatic, but for investors buying stock in profitless companies buoyed by aggressive projections, brutal corrections are all part of the unspoken contract.
DocuSign’s particular problem is that it didn’t foresee how quickly a surge in business would tail off. Chief Executive Dan Springer claims his sales teams were so driven by meeting clients’ orders that they didn’t have a chance to drum up new ones. DocuSign now thinks it will bill its customers 23% more in the current quarter than a year ago – where in summer, it was growing twice as fast.
The trouble is that in a frothy market, little changes lead to big changes. DocuSign had rocketed to a $46 billion market capitalization – after tripling in less than a year – because investors were following the dotted line on some dizzying trends. Springer’s firm had 285,000 customers around five years ago, and now it has 1.1 million. It has grown from $349 million of revenue in 2017 to a forecast of $2.1 billion next year.
The calculus of revised assumptions is unforgiving. If DocuSign could grow revenue by 30% a year for the next five years, it would end up with nearly $7.5 billion by 2027. Notch down that growth rate to 20%, and revenue increases to just $5 billion – knocking a third off DocuSign’s fair value, all else being equal. What’s more, Springer has vowed to invest “aggressively” to revive customer demand, so in the near term, profitability will probably suffer too.
Even with $5 billion of future sales, DocuSign would still have snagged a 10% share of what it says is the total addressable market of $50 billion, a thoroughly respectable result. And its estimate of its potential market has doubled since it listed in 2018. But long-term projections are only as good as investors’ belief in the management that stands behind them. On that score, DocuSign has some negotiating to do.
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