Morgan Stanley cuts DigitalOcean stock price target on valuation
Morgan Stanley reduced its price target for DigitalOcean (DOCN) to $150 from $175, citing valuation concerns despite strong growth and AI revenue acceleration. The stock has seen volatility, dropping 14% in a week but up 133% over a year. DigitalOcean reported Q3 revenue of $321M, up 40% YoY, and raised its 2027 outlook. Stifel also adjusted its target to $130, noting margin pressure but maintaining a Buy rating.
How this was made
The 30-second read
Why it matters
Analyst target reductions are likely to trigger short‑term selling pressure, though the earnings beat could sustain buying interest.
Market read
The earnings beat and subsequent target cuts provide fresh valuation guidance, influencing short‑term trading decisions on DOCN.
What to watch
Rapid AI‑related ARR acceleration and a low PEG of 0.76 may support a longer‑term upside beyond the immediate target revisions.
Background
DigitalOcean reported a 40% YoY jump in Q3 revenue to $321 million and EPS beat, prompting two major brokerages to lower price targets while maintaining bullish ratings.
Ticker impact
Morgan Stanley lowered its price target on DigitalOcean to $150 and Stifel cut its target to $130 after the company reported Q3 revenue up 40% to $321 million and EPS beat expectations.
potential modest downside as the market prices in the lower price targets
Analyst target reductions are fresh and directly affect valuation expectations, prompting short‑term sell pressure.
Market effects
Strong cloud‑infrastructure earnings may buoy peer SaaS and IaaS stocks, but analyst target cuts could temper sector enthusiasm.
US‑listed cloud providers could see slight repricing amid mixed signals from DigitalOcean.
Limited to technology and cloud‑services investors; no broader macro impact.
Counterpoint
Despite target cuts, the 133% YTD return and 21% revenue growth suggest the stock remains undervalued.
Key entities
- analystMorgan Stanley
Lowered price target to $150, maintains Overweight rating.
- analystStifel
Reduced price target to $130, maintains Buy rating.
