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Back in August, DigitalOcean's (NYSE: DOCN) stock took a plunge.
In November 2021, their stock traded for $125 per share. Last August it was at $43.
Now it’s struggling at $20. $10,000 invested in Digital Ocean in November 2021 would be worth $1,600 now.
What’s the trouble? JP Morgan cut their forecast from $34/share to $25/share after JPM updated their “model”. Barclays revised from $42 to $30 due to a “lack of catalysts“. Piper Sandler expect the stock to trade at $22/share over concerns about how DO’s management is “messaging low-teens growth for 2024.”
DigitalOcean is still losing money. If the firm reported rapid expansion, management could sell the story that they’re still in a growth phase and scaling up the business, with rich profits to come in the future after market share has been gained.
But Digital Ocean began all the way back in 2011. At this point, how much more traction are they going to get? Is there any IT shop that hasn’t heard about Digital Ocean? I think by now the potential customers who might consider signing up for DO have considered DO and already made a decision to try or pass.
So now instead of being projected as a red-hot growth company, they’re seen as a steady run-rate firm that’s losing money.
How low do you think their stock will go?
Source: RainDog308 on LET:
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