Wamsi Mohan, an analyst from Bank of America Securities, reiterated the Sell rating on DigitalOcean Holdings (DOCN – Research Report). The associated price target remains the same with $31.00.
Wamsi Mohan has given his Sell rating due to a combination of factors impacting DigitalOcean Holdings. Despite the company reporting strong first-quarter results with revenue and earnings surpassing expectations, there are underlying concerns about the sustainability of its growth trajectory. The management’s decision to maintain its full-year guidance indicates a cautious outlook, particularly as they observe increased caution in certain customer segments.
Another reason for the Sell rating is the company’s significant capital expenditure plans and the pressure this may place on free cash flow in the near term. While DigitalOcean is exploring strategies to expand capacity and capitalize on larger enterprise deals, the current lack of available capacity limits its ability to seize these opportunities. Additionally, the refinancing of convertible debt and the potential dilution it may cause are seen as risks. These factors, combined with a challenging small and medium-sized business market, contribute to the underperform rating.
DOCN’s price has also changed moderately for the past six months – from $38.820 to $28.250, which is a -27.23% drop .