digital NYSE:docn The stock price has struggled for years as competition reduces growth expectations, but times are changing. Analysts at Morgan Stanley highlighted the deep value opportunity when analysts upgraded the stock to Overweight. They view the stock as a deep value relative to peers, trading at just 20x earnings versus an average of nearly 25x, with a big catalyst ahead. The cloud service provider gets little to no credit for its position in the AI and Machine Bearing industry, but it is well positioned to profit and grow with it.
Digital today
- 52 week range
- $26.63
▼
$44.80
- P/E ratio.
- 45.51
- Target price
- $41.70
Digitalocean’s large clients are asking for more services and quarterly capacity, and the company is delivering. The crucial detail is that it does so without impacting the established core developer business, whose customers also want the service and ability to advance. Digitalocean’s business attractions include a developer-friendly platform with easy-to-use tools, a streamlined cloud architecture, and cost-saving services for smaller businesses. Those include serverless computing, a service that allows developers to run code without cumbersome server management. The takeaway is that Digitalocean is set up to grow and scale with its customers, which include many small developers and startups working hard to advance AI.
Morgan Stanley sets a $41 target on shares, other recent revisions. Stifel Nicolaus analysts issued another notable revision: a price target increase in December 2025. The company cited Digitalocean, among other software companies, the ability to monetize artificial intelligence. Analysts believe that increasing availability and accelerating adoption will keep the industry growing. The $40 price target is below the $41.70 consensus in mid-January, but a solid number that anticipates upside and is consistent with trends. Digitalocean’s consensus target has steadily increased throughout 2024 and is tracking higher in the first weeks of 2025, aiming for a minimum of 12% in this year.
Digitalocean growth stabilizes with a low hurdle bar
Digital stock forecasts today
$41.70
7.80% upHe catches
Based on 11 analyst ratings
| High expectations | $48.00 |
|---|---|
| Average expectations | $41.70 |
| Low expectations | $34.00 |
Digital stock forecast details
DigitaloCean’s growth slowdown is over, and the bar is set for Q4 and 2025, providing an opportunity for outperformance and a catalyst for stock prices. The 2024 results show stable growth in the low double-digit range, between 10% and 13%. After revisions from 100% of analyst coverage, the consensus for Q4 is at the low end of the range. However, acceleration is expected in 2025.
Forecasts for 2025 results have been trimmed significantly at the end of 2024 but they expect an acceleration to 13% and are likely to be very cautious. The industry is expected to grow at a higher pace of 15% in 2025, and this estimate may also be cautious. Digitization, including AI and IoT applications, is gaining momentum aided by the expansion of 5G globally.
Digital institutional investors in 2025
Institutional investors in Digitalocean show relatively high conviction, owning about 50% of the shares. However, activity in 2024 is consistent with market conditions associated with the group, with them buying when the stock had fallen and selling when it had. If this continues in 2025, the market may not go any higher. However, with growth stabilizing and expected to accelerate by the end of the decade, institutions will likely shift their stance in 2025 and return to a more bullish mode.
The technical outlook is improving. The Docn Stock market made a low point in late 2023 and is showing increasing support within the specified range. Price action in mid-2014 and early 2025 is consistent with that view, including bullish volatility in indicators like the MACD, the stochastic, and I watched the moving averages closely. Together, they amount to a solid signal, but there is a risk. Resistance at $42.50 and $50 levels could gain maximum.
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