The start of the COVID-19 pandemic saw tech stocks that enabled remote work gain massive traction. For example shares of Zoom Video (ZM) surged from $67 in January 2020 to $559 in October 2020. Comparatively, DocuSign’s (DOCU) stock rose from $75 at the start of 2020 to a record high of $310 in September 2021.

However, the reopening of economies and relaxation of lockdown restrictions meant revenue for both Zoom Video and DocuSign decelerated at an alarming pace, resulting in a massive sell-off in their share prices.

Right now, ZM stock is trading 81% below all-time highs while DOCU stock has lost 72%. Let’s see which beaten-down tech stock is a better buy right now.

Zoom Video

Valued at $31.3 billion by market cap, Zoom Video reported sales of $4.1 billion in fiscal 2022 (ended in January), an increase of 55% year over year. In Q4 of fiscal 2022, sales rose by 21% to $1.07 billion. While net income fell by 2% in Q4, it surged by 61% in fiscal 2022 to $1.06 billion.

Zoom ended the year with 2,725 customers that derive annual sales of more than $100,000, representing an increase of 66% year over year. Additionally, its net-dollar-expansion rate for customers with more than 10 employees stood at 129% which suggests existing customers increased spending by 29% on the platform in the last year.

In fiscal Q1 of 2023, Zoom expects revenue to rise by 12% but earnings might fall by 31% year over year. The company continues to increase spending to expand its customer base, add new features and focus on product development which should all translate to revenue growth going forward.

Analysts expect Zoom to increase sales by 11% to $4.55 billion in fiscal 2023 and by 13.7% to $5.17 billion in fiscal 2024. However, its adjusted earnings might contract from $5.07 in 2022 to $4.02 in 2024.

DocuSign

One of the major players in the digital signature space, DocuSign continues to enter new verticals by leveraging tools such as artificial intelligence (AI). For example, DocuSign Insight uses AI to identify problems associated with agreement clauses, saving time and improving efficiency for clients.

Further, the DocuSign Agreement Cloud integrates 12 applications that allow enterprises to streamline and manage the end-to-end contract signing process, making it ideal for those with a high volume of document processes.

DocuSign has more than a million paying customers allowing the company to grow sales by 45% year over year to $2.45 billion in fiscal 2022 which ended in January. Its earnings per share more than doubled to $1.98 as well.

A key reason for the sell-off in DOCU stock was its tepid revenue estimates going forward. However, DocuSign is still on track to increase sales by 17.5% to $2.5 billion in fiscal 2023 and by 17.2% to $2.9 billion in fiscal 2024. Comparatively, its adjusted earnings are forecast to rise from $1.98 in 2022 to $2.3 in 2024.

The verdict

I believe both Zoom Video and DocuSign could be solid long-term bets. However I believe Zoom Video is currently the better buy.  That’s because In terms of valuation, Zoom Video trades at a forward price to 2023 sales multiple of 6.9x and a price to earnings ratio of 29.7x. DocuSign trades at a forward price to sales multiple of 6.9x and a price to earnings ratio of 44x.  And Wall Street analysts expect DOCU stock to gain 19% in the next 12-months, while ZM stock is trading at a discount of almost 53% right now.

ZM shares were trading at $104.89 per share on Tuesday morning, up $0.10 (+0.10%). Year-to-date, ZM has declined -42.97%, versus a -12.34% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditya Raghunath

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...

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