William Blair initiated research coverage of DigitalOcean Holdings, Inc. (DOCN $107.69), which provides a comprehensive cloud platform designed to simplify cloud infrastructure for developers, start-ups, and small to midsize businesses.
Analyst James Breen estimated the company would generate sales of $426.8 million in 2021 and $557.1 million in 2022, and noted it has become free cash flow positive in recent quarters.
“DigitalOcean has a differentiated platform that appeals to an underserved segment of the market,” Breen said, “with a core focus on simplicity, community, open source, and customer support that separates it from large cloud competitors. Typical cloud offerings from the hyperscale public cloud providers are often designed for enterprise use-cases and are more complex and difficult for smaller customers to implement. Since individual developers, start-ups, and SMBs do not typically have the internal resources and budgets to successfully implement and manage hyperscale offerings, there is a need for comprehensive offerings designed with this subset of the market in mind. DigitalOcean fills this void and was founded on the guiding principle that the transformative benefits of the cloud should be easy to leverage, broadly accessible, reliable, and affordable.”
Breen continued, “The company has a large and growing addressable market, which is expected to more than double over the next four years to $116 billion. Its efficient go-to-market model and involvement in the developer community are driving strong customer growth, while the ease-of-use of its products and developer tools are driving product adoption across the company’s platform. DigitalOcean is investing to enhance its efficient self-service funnel and inside sales teams, both domestic and international, which should drive further adoption among SMBs and help the company expand its customer base at 10% or better annually. In addition, DigitalOcean will continue to broaden its product suite with the introduction of new offerings, and intends to pursue acquisitions and strategic partnerships that are complementary to its business, to accelerate customer acquisition, increase usage of its platform, and expand product offerings in core markets.”
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