What Happened:
Shares of cloud computing provider DigitalOcean (NYSE: DOCN) fell 6.23% in the after-market session after the company reported first-quarter results that narrowly beat analysts' revenue estimates. However, annual recurring revenue (ARR), earnings per share, and free cash flow missed, while gross margin experienced a significant decline. On a brighter note, revenue guidance for the next quarter came in roughly inline with analysts' estimates, and the full year revenue guidance came in above Consensus. Overall, it was a mixed quarter for the company, taking into account the high expectations established for fast-growing SaaS stocks.
What is the market telling us:
DigitalOcean's shares are very volatile and over the last year have had 58 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was 14 days ago, when the company dropped 5.26% on the news that analyst Mike Cikos of Needham downgraded the stock's rating from Buy to Hold. The analyst did not provide a price target.
DigitalOcean is up 26.2% since the beginning of the year, but at $32.25 per share it is still trading 38.8% below its 52-week high of $52.67 from August 2022. Investors who bought $1,000 worth of DigitalOcean's shares at the IPO in March 2021 would now be looking at an investment worth $758.82.
Is now the time to buy DigitalOcean? Access our full analysis of the earnings results here, it's free.