Technical Selling: Growth stock down 73% to buy now |  Motley asshole

Technical Selling: Growth stock down 73% to buy now | Motley asshole

Thanks to the constant migration of everyday life to the online world, adoption of cloud services is growing rapidly – whether individuals pay $0.99 per month for apple (AAPL -2.74%) to iCloud storage, or the workplace spends thousands of dollars a month for more advanced tools and services.

Cloud computing started decades ago as an innovative way to store data, but the capabilities offered by the leading cloud service providers are constantly evolving, and new opportunities are emerging across the industry. These opportunities could be worth $483 billion in 2022, but are expected to triple to more than $1.5 trillion annually by 2030.

Image source: Getty Images.

with the Nasdaq 100 The tech index is in a bear market, investing in a fast-growing industry over the long term can be a great way to profit from it. Digital Ocean (DOCN -9.58%) It is a specialized cloud service provider that competes with industry giants. This is why it can be the best long-term investment in this sector.

small but great

DigitalOcean is a $3.7 billion company, yet it rivals giants like Amazon (AMZN -3.20%)valued at more than $1.2 trillion. Amazon Web Services (AWS), the latter’s cloud business, generated more than $60 billion in revenue last year alone. Microsoft (MSFT -2.88%) It is another major competitor to the cloud of similar proportions.

But DigitalOcean excels where there are no giants: serving small and medium-sized businesses with fewer than 500 employees. These entities often fall through the loopholes of the largest service providers, so DigitalOcean attracts them with the lowest prices in the industry, great customer service, and an easy-to-use platform that reduces the need for expensive technical staff.

The company offers monthly subscription plans for start-up businesses ranging in price from $0 to $15, for a variety of needs ranging from basic data storage, application creation, and virtual machine deployment. DigitalOcean’s bandwidth stuns the competition by a huge margin, starting at just $0.01 per GB per month — 80% cheaper than the next best option.

The company has amassed more than 623,000 customers as of the first quarter of 2022, and is operating on all cylinders financially.

Strong financial growth

DigitalOcean announced its first-quarter 2022 earnings results on May 4, revealing 36% year-over-year revenue growth. It’s the fourth consecutive quarter of revenue growth to top 35%, thanks to a growing group of more than 102,000 customers who spend more than $50 a month.

In fact, the company’s average revenue per user has reached an all-time high in at least eight consecutive quarters, accompanied by a high revenue retention rate of 117%. This means that existing DigitalOcean customers have spent 17% more with the company than they did in the prior year period, which is an impressive result considering it primarily serves small to mid-sized businesses.

Graph of DigitalOcean's incremental revenue and average revenue per user.

It bodes well in the long run

DigitalOcean expects its market opportunity to exceed $72 billion this year, a subset of the previously mentioned $483 billion figure that covers the entire cloud industry.

But growth in the DigitalOcean opportunity is expected to run at a compound annual rate of 27%, compared to 15% for the rest of the sector. This will increase the $72 billion figure to $145 billion annually by 2025. This means that even though the company is swimming in a smaller pool, it has a chance to grow faster than some of its biggest competitors.

In the near term, DigitalOcean is set to exceed half a billion dollars in revenue for the first time in 2022, and is set to deliver up to $0.71 in non-GAAP earnings per share (net income). If it meets this guidance, it will represent 108% earnings growth over 2021.

DigitalOcean has grabbed a fraction of its opportunity so far, but it’s expanding rapidly, and investors may want to consider entering while its shares traded at a whopping 73% discount to an all-time high.

2022-05-09 13:51:00

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