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DigitalOcean Holdings (NYSE: $DOCN) Stock

DigitalOcean Holdings, Inc. (NYSE: $DOCN) delivers a cloud computing platform that furnishes startups and small to medium-sized businesses (SMBs) with on-demand infrastructure, software tools, and platform solutions.

This comprehensive suite of cloud services includes advanced networking options and the flexibility to leverage both Graphics Processing Units (GPUs) and Central Processing Units (CPUs).

The company provides essential solutions encompassing Infrastructure-as-a-Service (IaaS), featuring virtual machines like Droplets, storage, and networking services. It also extends to Platform-as-a-Service (PaaS), incorporating Managed Database and Managed Kubernetes offerings, and Software-as-a-Service (SaaS), which includes Managed Hosting and Marketplace services.

These offerings cater to customers from various industry sectors, supporting diverse use cases such as web and mobile applications, website hosting, media and gaming, personal web projects, managed services, and more.

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DigitalOcean Holdings Inc (DOCN) Q3 2023 Earnings

On November 2, 2023, DigitalOcean Holdings Inc (NYSE: DOCN) unveiled its third-quarter earnings report, covering the period ending September 30, 2023. The company disclosed a 16% year-over-year surge in revenue, reaching $177 million. The quarter’s GAAP Net Income amounted to $19 million, and the Adjusted EBITDA stood at $76 million, marking a notable 23% increase year over year.

DOCN’s financial highlights for Q3 2023 encompassed several key points. These included a robust 16% year-over-year revenue growth to reach $177 million, along with an 11% year-over-year expansion in Annual Run-Rate Revenue (ARR) to $713 million.

The company reported a gross profit of $107 million, equivalent to 60% of total revenue. Net income attributable to common stockholders stood at $19 million, with a net income margin of 11%. Adjusted EBITDA reached $76 million, reflecting a substantial 23% year-over-year increase, and the adjusted EBITDA margin was 43%. As of September 30, 2023, the company held cash, cash equivalents, and marketable securities totaling $384 million.

In Q3 2023, DigitalOcean successfully completed the acquisition of Paperspace, a leading provider of cloud infrastructure as a service geared towards highly scalable applications utilizing graphics processing units (GPUs).

Noteworthy operational metrics included a Net Dollar Retention Rate (NDR) of 96% and an Average Revenue Per Customer (ARPU) of $92.06, signifying a 6% uptick from Q3 2022. The count of Builders and Scalers, representing customers spending more than $50 per month, grew by 9% compared to Q3 2022, and their revenue increased by 16% year over year.

The company also executed share repurchases, buying back 3,350,349 shares at a cost of $106 million during the quarter, making the year-to-date total reach 13,888,704 shares repurchased for a total of $475 million in 2023.

For Q4 2023, DOCN has set its sights on achieving total revenue of $178 million, an Adjusted EBITDA margin within the range of 36% to 37%, and a non-GAAP diluted net income per share between $0.36 and $0.37.

Looking at the full year 2023, the company anticipates total revenue of $690 million, an Adjusted EBITDA margin within the range of 38% to 39%, an adjusted free cash flow margin in the range of 21% to 22% of revenue, and a non-GAAP diluted net income per share between $1.52 and $1.54.

Why DOCN Stock Went Up On Fri, November 3, 2023

Shares of DigitalOcean (NYSE: DOCN), a cloud computing provider, surged by 13.1% during the morning trading session following the release of a remarkable “beat and raise” quarterly report. The company’s third-quarter results outperformed analyst expectations for both revenue and EPS.

Moreover, the revenue guidance for the upcoming quarter exceeded consensus estimates, and the full-year revenue guidance was not only above expectations but also raised.

However, it’s worth noting that while net revenue retention declined, the company maintained positive free cash flow. It anticipates a robust free cash flow in the range of 21% to 22% of revenue for the fiscal year 2023, despite ongoing investments in Paperspace integration.

It’s essential to highlight that DigitalOcean is actively in pursuit of a new CEO with expertise in cloud infrastructure. Progress is being made in this regard, although no specific timeline has been disclosed. In a nutshell, DigitalOcean has delivered a strong quarter.

DigitalOcean’s stock has exhibited considerable volatility, experiencing 35 movements greater than 5% in the past year. Notably, moves of this magnitude, even for DigitalOcean, are relatively infrequent, underscoring the substantial impact of this news on the market’s perception of the business.

The most significant move we reported on in the past year occurred two months ago when the company’s stock declined by 11.8%. This drop followed the announcement of a succession plan to identify the next CEO. Current CEO Yancey Spruill will be departing from the company and the Board of Directors once a successor is appointed.

What is the Target Price For DigitalOcean stock?

Out of the 9 analysts providing 12-month price projections for DigitalOcean Holdings Inc., the median target is $30.00, with a high estimate of $52.00 and a low estimate of $22.00. This median estimate indicates a significant +46.13% increase from the recent price of $20.53.

Is DOCN a Good Buy?

According to the average price target of analysts, DigitalOcean Holdings has a potential upside of 34.23%. The consensus rating for DigitalOcean Holdings is “Hold,” derived from a breakdown of 2 buy ratings, 4 hold ratings, and 3 sell ratings.

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