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DigitalOcean (New York Stock Exchange: DOCN) Involved dropped nearly 6% in pre-market trading Thursday after investment firm Piper Sandler downgraded the cloud software company, citing “multiple concerns.”
Analyst James Fish downgraded DigitalOcean (DOCN) stock to below neutral weight, but kept the stock intact. $35 price target, noting that the company’s large SMB exposure, utilization model, and slowing revenue are some of the issues that are negatively impacting the company.
“DigitalOcean is the most exposed in our SME coverage and has a 100% usage-based model that results in more overall sensitivity,” Fish wrote in an investor note. “The macro environment is not improving, with the NFIB Small Business Survey in a downward trend. Tight budgets and cloud improvements likely limit upselling and cross-selling opportunities.”
In addition to the aforementioned issues, Fish also expressed concern about the portfolio’s “diminished” competitiveness as competitors catch up, a “questionable” use of capital that focused on stock buybacks rather than transforming its portfolio or reforming its capital structure, as well as a “extended” After the stock jumped more than 60% over the past six months.
Fish also said that DigitalOcean (DOCN) “missed a real AI opportunity” by not offering GPU-as-a-Service, noting that as AI applications scale, they will need GPUs, which could increase the rate of change if the company doesn’t. so. It can`t handle the issue.
Analysts are largely cautious about DigitalOcean (DOCN). she has He buys The rating is from the authors of Looking for Alpha, while Wall Street analysts rated it a Catch. On the contrary, research on the alpha quantitative system, which is constantly outperforming the market, ranks DOCN a Catch.