Canaccord raises DigitalOcean stock price target to $55 on turnaround signs

Investing.com - Canaccord Genuity raised its price target on DigitalOcean (NYSE:DOCN) to $55.00 from $49.00 on Thursday, while maintaining a Buy rating on the cloud infrastructure provider. The company, currently trading at $37.84 with a market capitalization of $3.4 billion, appears fairly valued according to InvestingPro analysis.

The firm cited encouraging signs of a business turnaround, including the highest incremental Annual Recurring Revenue (ARR) in nearly three years and 76 cloud migration wins reported in the company’s second-quarter results. DigitalOcean also significantly raised its total revenue guidance during that report. The company maintains strong fundamentals with a healthy 60.4% gross margin and a solid current ratio of 2.27.

Canaccord believes DigitalOcean shares have room to "move materially higher" if growth returns to high-teens levels, potentially driven by emerging AI inference opportunities combined with steady growth in core cloud services. The company has already demonstrated consistent growth with a 13.29% revenue increase over the last twelve months.

The investment firm characterized the situation as "the early makings of a classic business turnaround," rather than a temporary improvement. Canaccord raised its fiscal 2026 and 2027 revenue estimates based on improved visibility into management’s targets.

Canaccord’s analysis followed meetings with DigitalOcean’s CFO Matt Steinfort and Head of Investor Relations Melanie Strate in New York City last week, which reinforced the firm’s positive outlook on the company. For deeper insights into DigitalOcean’s financial health and growth potential, including additional ProTips and comprehensive analysis, check out the detailed research report available on InvestingPro.

In other recent news, DigitalOcean announced the closing of a $625 million convertible notes offering, which will mature in 2030. This financial move generated approximately $605.6 million in net proceeds, accounting for deductions such as discounts and commissions. At the Deploy 25 event in London, DigitalOcean unveiled several updates to its AI and cloud services, including enhancements to its Gradient AI Platform, which now supports text-to-image generation and offers improved security for enterprise deployments.

Analyst coverage has been active, with UBS resuming coverage of DigitalOcean with a Neutral rating and a $40 price target. Meanwhile, Citizens and JMP Securities have both reiterated their Market Outperform ratings, each setting a $55 price target. Citizens highlighted DigitalOcean’s mission to simplify cloud and AI services, which it believes aligns well with the needs of Digital Native Enterprises. These developments reflect a period of strategic initiatives and analyst attention for DigitalOcean.

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