2023-09-08 10:12:14 ET
DigitalOcean Holdings ( NYSE: DOCN ) slipped 3.4% on Friday after BofA Securities downgraded the cloud computing platform operator to Underperform from Buy and cut its price target to $25 from $47.
BofA's data suggested that traffic to DigitalOcean's domain has materially slowed since the beginning of the year and the investment bank now expected customer growth, ARPU, and churn metrics to turn worse in the near term.
"DOCN’s customer additions have been slowing, and disclosures have been changing as well. Given the weaker macro backdrop, we see headwinds to customer acquisition and the ability to move ARPU higher," said BofA Analyst Wamsi Mohan.
DigitalOcean's customer base, made of start-ups and small to mid-sized businesses, is seen as the worst hit from the current high inflationary environment.
In August, the company slashed its 2023 revenue guidance range to $680 - $685 million, compared to a prior range of $700 - $720 million forecasted during its first quarter results.
BofA also noted that the previously announced CEO change is taking "longer than expected" mixed with the fact that the company CFO has been in the current role recently since January.
Chief Executive Officer Yancey Spruill would continue to serve in his current role until the board has appointed a successor.
DigitalOcean has gained about 1% since the start of the year but has fallen 40.25% on a 12-month reading. DOCN is rated Hold by SA analysts and Wall Street but is marked sell by Seeking Alpha Quant rating system.
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DigitalOcean downgraded to Underperform by BofA on growth worries, CEO change