The current market selloff has hit high-flying AI plays hard. And shifting market sentiment may keep many AI players, particularly in the hardware space, from making new highs anytime soon. However, the software side is different.
That’s because new software upgrades can be rolled out as they’re made. And companies incorporating AI tools can roll those out immediately too. Combined with a recurring-revenue model, it could make software-related AI plays the winner for the next upswing in tech stocks.
One sign of this trend is with DocuSign (DOCU). The e-signature company has been pushing for more AI tools, and is starting to see growing earnings thanks to those additions.
Following their earnings, DocuSign is now up over 30% in the past year, but still remain about 15% off their highs.
But with a 36% profit margin and growing revenues, shares may have more room to run, especially with shares trading just under 20 times forward earnings, a low valuation for a growth stock play.
Action to take: Investors may like shares here for further upside, the post-earnings jump suggests a re-test of DocuSign’s 52-week high is possible.
For traders, the June $100 calls, last trading for about $4.00, could see mid-double-digit returns from a continued move following the post-earnings pop higher.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.