DigitalOcean risk-reward viewed as balanced at Morgan Stanley
DigitalOcean (NYSE:DOCN) was upgraded from Underweight to Equal-weight by equity analysts at Morgan Stanley Research. The firm also adjusted its price target on the stock, raising it to $36 from $30 previously. The upgrade was tied to views that positives and negatives for the company have evened out.
Analysts at the bank said their underweight thesis has already “played out” and they view risk-reward as more balanced, with near-term challenges and long-term opportunity now fairly priced into the stock.
“We previously downgraded as we saw growing evidence of a slowdown in the software spend environment, and we narrowed our focus in the broader Software team's coverage universe and positioned more cautious on companies operating consumption pricing models,” said analysts.
They added, “Since the downgrade, management pushed its $1 billion revenue target from 2024 to 2025 and lowered 2023 revenue guidance two times. Consensus estimates largely followed guidance lower and we now think that the setup looks achievable.”
Trading at $36 per share, DigitalOcean’s stock is up 40% year-to-date, but it is also 35% below the July high near $52.
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