Is DocuSign a Buy After Crashing 42% on Friday?

Shares of DocuSign (NASDAQ:DOCU) plunged on Friday to levels not seen since the early stages of the coronavirus pandemic in 2020. The stock closed at just over $135 --- down more than 42% from the more than $233 that it closed on the previous day.

The reason for the sharp selloff was due to the company's third-quarter earnings report, which it released last week. Although it beat expectations for both revenue and earnings, it was DocuSign's future that has investors worried. For the fourth quarter, it expects its top line to come in between $557 million and $563 million while analysts were expecting just under $574 million. With $1.53 billion already in this books thus far, DocuSign is on track to close in around $2.09 billion in revenue for fiscal 2022, which comes to an end on Jan. 31, 2022. That would be a 44% increase from the $1.45 billion that it reported for fiscal 2021.

Although investors may be concerned that demand for digital signatures will decline in the future as people go back into physical offices, analysts from Fortune Business Insights still see plenty of growth ahead; according to a recent report, they expect the global digital signature market to grow at a compounded annual growth rate of 28.9% up until 2027, when it will be work close to $8 billion.

DocuSign's recent selloff looks to be a gross overreaction all due to a miss in guidance. Investors have the potential to pick up a top growth stock at almost pre-pandemic prices, which could make this a great deal right now.