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On Monday, Canaccord Genuity adjusted its price target for DigitalOcean (NYSE:DOCN) shares, bringing it down to $45 from the previous $50, while still recommending a Buy rating for the cloud infrastructure provider. The revision comes amidst a broader market downturn, with DigitalOcean’s stock declining 14.2% over the past week. According to InvestingPro data, the stock’s RSI indicates oversold territory, suggesting potential for a technical rebound. With analyst targets ranging from $31 to $55, the current price of $28.65 reflects significant potential upside.
The firm’s analyst remarked on the strength of DigitalOcean’s analyst day presentation but noted that the broader macroeconomic uncertainties this week have led to a lack of immediate positive market response. Despite the downturn, Canaccord Genuity sees inherent value in software stocks, including DigitalOcean, especially given its free cash flow (FCF) and potential for growth reacceleration. InvestingPro analysis shows the company maintains strong fundamentals with a healthy current ratio of 2.45 and generated $104.56 million in levered free cash flow over the last twelve months.
DigitalOcean’s current valuation, trading at roughly 4 times its forecasted 2026 sales and 21 times its projected 2026 FCF, positions it favorably on Canaccord’s list due to the company’s strong FCF and its exposure to expected growth trends. The firm anticipates releasing a more detailed model update before DigitalOcean’s first-quarter earnings report, which is expected in May.
The revised price target of $45 reflects a 5.5 times multiple of the company’s estimated 2026 sales and a 30 times multiple of its projected 2026 FCF, according to Canaccord Genuity’s analysis. Despite the recent stock performance and market volatility, the firm maintains its positive outlook on DigitalOcean’s financial prospects.
In other recent news, DigitalOcean has been the focus of several analyst updates and product announcements. The company has forecasted an 18%-20% year-over-year revenue growth by 2027, with plans to accelerate beyond 20% in subsequent years, as shared during their Investor Day. Analysts from Needham have maintained a Hold rating on DigitalOcean, expressing cautious optimism about the company’s strategic direction despite potential economic headwinds affecting its customer base. Stifel also kept a Hold rating but lowered the stock price target from $40 to $33, noting challenges related to the company’s balance sheet and the need to refinance a $1.5 billion convertible note.
Citizens JMP reaffirmed a Market Outperform rating with a $55 price target, citing DigitalOcean’s innovation pace and new product offerings as positive indicators for long-term growth. DigitalOcean recently introduced its Partner Network Connect service, aimed at simplifying multi-cloud and hybrid-cloud networking for businesses, with benefits such as improved security and cost optimization. The company is also enhancing its AI capabilities, launching a platform for creating AI agents and partnering with Advanced Micro Devices (NASDAQ:AMD) to support AI integration. These developments reflect DigitalOcean’s commitment to expanding its market presence and product offerings, according to analysts.
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