DocuSign surges as analysts praise results, calling them a 'step in the right direction'
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DocuSign (NASDAQ:DOCU) shares surged more than 16% on Friday after it reported second-quarter figures and guidance that topped expectations, and analysts praised the results amid uncertainty surrounding the electronic agreement company.
J.P. Morgan analyst Sterling Auty, who has a neutral rating on DocuSign (DOCU), noted that its next phase of growth will come from selling more to its larger installed base and while it's in the "early innings" of this, there could be bumps in the road, even if its financial profile is strong. 
"While DocuSign continues to carry an attractive free cash flow profile at scale, near-term profitability may remain weaker relative to the elevated levels seen in fiscal 2022, as the company leans into investments in key growth areas, including international expansion and multi-product adoption, in an effort to reaccelerate growth," Auty wrote in a note to clients.
For the third-quarter, DocuSign (DOCU) said it expects revenue to be between $624M and $628M, or up to 15% more than the $545.5M it pulled in last year. It also expects full-year revenue to be between $2.47B and $2.48B, compared to $2.1B last year. 
In addition, Auty noted that DocuSign (DOCU), which has an interim CEO after Dan Springer resigned in June, is dealing with a turnaround strategy that could take several quarters to come to fruition. 
"As such, we believe that Docusign shares offer a fairly balanced risk/reward setup in the near term, and believe material upside to shares is dependent on sustainable sales execution under a revamped leadership team," the analyst added.
Wedbush Securities analyst Dan Ives called DocuSign's (DOCU) results a "nice step in the right direction," but added that challenges remain. 
"We continue to be skeptical based on our checks that the momentum continues at DocuSign and thus maintain our UNDERPERFORM rating given the risk/reward in shares at current levels," Ives wrote in a note to clients.
Last month, investment firm UBS said that another guide-down from DocuSign (DOCU) seemed likely, noting a "right-sizingâ in renewals, as well as increased competition from Adobe (ADBE).