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DigitalOcean IPO: 10 Things to Know as DOCN Stock Starts Trading

Here's why DOCN stock is in the spotlight today

By Chris MacDonald, InvestorPlace Contributor Mar 24, 2021, 3:12 pm EDT

Shares of fresh IPO stock DigitalOcean Holdings (NYSE:DOCN) began trading today. This DigitalOcean IPO was initially priced at $47 per share, though DOCN stock has slipped as much as 17% in early trading as investors appear to be digesting what this company is truly worth.

A laptop screen displays the logo for DigitalOcean (DOCN).

Source: monticello / Shutterstock.com

Any company like DigitalOcean operating in the cloud space is likely to get a lot of attention in this market.

Let’s look at a few things DOCN investors might want to know.

Key Things to Know About the DigitalOcean IPO

  • DigitalOcean raised $775 million from its IPO. Accordingly, the company expects to use these funds to grow its existing infrastructure footprint.
  • Currently, DigitalOcean operates 14 data centers globally via leases.
  • Shares opened lower, and have traded lower than the company’s initial offer price of $47 since the markets opened today.
  • At the time of writing, the cloud infrastructure play has a market capitalization of around $4.5 billion.
  • It appears some investors think this valuation is steep, considering the company’s financials.
  • Indeed, the company reported a $43.6 million net loss on $318 million in revenue last year. Despite revenue growing by around 25%, its loss also grew by 7%.
  • DigitalOcean earns most of its revenue from what it calls “droplets.” Essentially, these allow customers access to tranches of physical servers.
  • Accordingly, DigitalOcean is pursuing strategic moves to expand its margin long term. The company hopes to generate higher recurring income while reducing R&D, and SG&A costs as a percentage of revenue.
  • The company’s growth prospects appear to be strong. Investors are pricing in a price-sales multiple on this stock well in excess of Microsoft (NASDAQ:MSFT) currently.
  • Accordingly, investors are betting DigitalOcean can capture market share from industry leaders Amazon (NASDAQ:AMZN) and Microsoft, major players in cloud computing.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

Article printed from InvestorPlace Media, https://investorplace.com/2021/03/digitalocean-ipo-10-things-to-know-as-docn-stock-starts-trading/.

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