Why the Nitro (ASX:NTO) share price is sinking 10% today

Nitro is under pressure on Friday…

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Man with his head in his head because of falling share price.

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The Nitro Software Ltd (ASX: NTO) share price is on course to end the week deep in the red.

In morning trade, the document productivity and eSigning company’s shares are down 10% to $3.00.

Why is the Nitro share price down 10%?

Investors have been selling down the Nitro share price in response to something across in the United States.

After the market close on Wall Street this morning, Nitro’s larger rival DocuSign Inc (NASDAQ: DOCU) released its quarterly results. While DocuSign reported a 44% increase in subscription revenue to US$528.6 million, its weaker than expected outlook spooked the market.

This led to the DocuSign share price crashing 30% during after hours trade, wiping off US$15 billion from its market capitalisation.

And unfortunately for the Nitro share price, investors appear to believe this could be a sign that Nitro’s outlook may not be as positive as hoped.

Is this a buying opportunity?

While Bell Potter could yet adjust its recommendation for Nitro to reflect DocuSign’s update, it has been very bullish on the company recently.

For example, last month the broker retained its buy rating and $4.50 price target on its shares. This implies potential upside of 50%.

Bell Potter was pleased with the company’s game-changing acquisition of Connective NV.

It commented: “Nitro announced it has entered into a binding agreement to acquire Connective NV for an EV of €70m (~US$81m). Connective is Belgium’s leading eSign SaaS business with fast growing market share in France and customers in 11 other European countries. The rationale for the acquisition is it will accelerate and enhance Nitro’s eSign, eID (electronic identity) and document workflow capabilities. It will also position Nitro to become the third global player in the enterprise eSign market along with DocuSign and Adobe.”

Should you invest $1,000 in Nitro right now?

Before you consider Nitro, you'll want to hear this.

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*Returns as of January 13th 2022

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Nitro Software Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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