Can DigitalOcean Holdings, Inc. (DOCN) Run Higher on Rising Earnings Estimates?

DigitalOcean Holdings, Inc. (DOCN) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.

Analysts' growing optimism on the earnings prospects of this company is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For DigitalOcean Holdings, Inc. Strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

Current-Quarter Estimate Revisions

The earnings estimate of $0.37 per share for the current quarter represents a change of +32.14% from the number reported a year ago.

Over the last 30 days, the Zacks Consensus Estimate for DigitalOcean Holdings, Inc. has increased 57.72% because one estimate has moved higher while one has gone lower.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $1.61 per share, representing a year-over-year change of +1.26%.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for DigitalOcean Holdings, Inc. Over the past month, four estimates have moved higher compared to two negative revisions, helping the consensus estimate increase 71.89%.

Favorable Zacks Rank

Thanks to promising estimate revisions, DigitalOcean Holdings, Inc. currently carries a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Investors have been betting on DigitalOcean Holdings, Inc. because of its solid estimate revisions, as evident from the stock's 6.4% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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