Key Takeaways
- DigitalOcean shares rose 2% today after Piper Sandler upgraded the stock to Overweight from Neutral, even as it cut its price target to $126 from $142.
- Piper Sandler’s case is the stock’s recent pullback from its 52-week high of $187.50.
- Analysts expect revenue to roughly triple from fiscal 2025 to fiscal 2028, so the stock’s valuation depends on DigitalOcean’s AI push delivering that growth.
- Third-quarter results on Nov. 3 are the next test, against management’s guidance for 32% to 34% revenue growth.
DigitalOcean (DOCN) shares are now up 2% after initially jumping 6% early today after Piper Sandler upgraded the stock to Overweight from Neutral before the open.
In the same note, analyst James Fish also cut his price target to $126 from $142.
When an analyst cuts the target and raises the rating in the same note, the stock has usually taken a beating, and this one has. Piper Sandler pointed to the recent pullback, with DigitalOcean closing yesterday nearly 50% below its 52-week high of $187.50, and even the lower $126 target sits more than 25% above that close.
The pullback didn’t make it cheap
Still, the drop didn’t leave DigitalOcean cheap on earnings. Its forward P/E was 73x at yesterday’s close, well above its five-year average of 47x. Today’s jump takes it closer to 78x…
(That’s still far below the 256x it hit in late 2021.)
TIKR tracks 17 analysts on DigitalOcean. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on DigitalOcean, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See DigitalOcean’s Analyst Ratings
The AI push has to show up in revenue
So the upgrade is really a bet on growth. DigitalOcean now pitches itself as an AI-native cloud built for inference and agentic workloads, and analysts are already counting on that pitch to pay off.
Consensus has revenue climbing from $900 million in fiscal 2025 to about $2.7 billion in fiscal 2028, which would take growth from 15% in 2025 to more than 50% in 2027…
That’s a lot to live up to.
The first check comes before the market opens on Nov. 3, when DigitalOcean reports its third quarter. In August, management guided for third-quarter revenue of $304 million to $307 million, up 32% to 34% from a year earlier. That’s roughly the pace analysts expect for all of 2026.
My take: Piper Sandler has a point. Revenue growth is already running above 30%, and the pullback gives investors a much better price on a business analysts expect to triple its sales in three years. But at more than 70x forward earnings, the stock has little room for a miss.
Of course, the bigger ask is 2027, when analysts expect growth above 50%. Anything management says on Nov. 3 about next year could matter more than the quarter itself.
So what is DigitalOcean stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
