'The Shopify of Cloud Computing' Citron Sees Nearly 300% Upside in DigitalOcean (DOCN), Shares Gain as Setup 'Very Attractive' Going Into This Week’s Q2 Print

August 2, 2021 11:30 AM EDT
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Citron Research has a $200.00 price target on DigitalOcean (NYSE: DOCN), which is a premium of nearly 300% compared to the Friday closing price.

Citron sees DOCN as the “Shopify of Cloud Computing” as the research firm says them not realizing the power of Shopify (NYSE: SHOP) when the stock was $100 marks “one of the greatest blunders we have made over the past 20 years of publishing.”

DigitalOcean, a cloud computing platform focused on SMBs, charges much less than the bigger cloud infrastructure providers e.g. AWS, Google, Azure, etc. The company takes pride in cheap and simple cloud solutions.

“We’ve seen this movie before and just like how Shopify and Square saw that SMBs were not far behind large enterprises in adopting ecommerce and digital payments, DigitalOcean is in the leading position to capitalize on this mega trend,” Citron writes in a note sent to clients.

The research continues with drawing comparisons with Shop, this time about passionate users.

“After speaking with former employees, customers, and even the competition, we have found that DigitalOcean’s customer base is even more passionate and evangelical than that of Shopify, which leads us to believe that DigitalOcean will become the dominant SMB cloud provider.”

DOCN is due to report Q2 2021 earnings Thursday before the market open. Citron sees a “very attractive setup” going into the print, due to:

  1. DigitalOcean CEO’s tendency of delivering quarterly sales beats during his time as COO/CFO of SendGrid;
  2. Low expectations;
  3. Cloud computing industry is recording a notable acceleration in growth this quarter, as per Microsoft, Amazon, Google, etc.;
  4. According to Goldman Sachs, “top-line growth acceleration” is a key priority for DOCN;
  5. DOCN will participate in three investors conferences and will share more data about the business and outlook.

Shares of DigitalOcean are up more than 4% in today’s trading session.

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