DigitalOcean (DOCN): Valuation Check After Gradient AI Agent Kit Launch and New Persistent Systems Partnership

DigitalOcean Holdings (DOCN) caught fresh attention after its shares climbed about 4% following the launch of its Gradient AI Agent Development Kit, which came on the heels of a multi year AI partnership with Persistent Systems.

See our latest analysis for DigitalOcean Holdings.

Beyond today’s pop, DigitalOcean’s 30 day share price return of 7.78% and 90 day share price return of 29.94% suggest momentum is building. A 3 year total shareholder return of 92% points to a compelling longer term track record.

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With shares already up sharply this year and trading at a modest discount to Wall Street targets, the big question now is whether DigitalOcean is still mispriced or if the market is already pricing in its next phase of growth.

Most Popular Narrative Narrative: 10.9% Undervalued

With DigitalOcean closing at $47.52 against a narrative fair value of about $53.33, the story points to meaningful upside if its assumptions play out.

The analysts have a consensus price target of $41.6 for DigitalOcean Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $55.0, and the most bearish reporting a price target of just $32.0.

Read the complete narrative.

Curious how steady double digit growth, shifting margins, and a punchy future earnings multiple all combine into that fair value line? The full narrative unpacks the exact revenue path, profit profile, and valuation gear change that need to click into place for this pricing gap to close.

Result: Fair Value of $53.33 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, steadily rising AI competition and still fragile customer retention metrics could quickly undermine these growth assumptions if execution slips or if hyperscalers out-innovate DigitalOcean.

Find out about the key risks to this DigitalOcean Holdings narrative.

Build Your Own DigitalOcean Holdings Narrative

If you would rather challenge these assumptions or rely on your own research, you can build a personalized view in just a few minutes: Do it your way.

A great starting point for your DigitalOcean Holdings research is our analysis highlighting 3 key rewards and 4 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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