Public Companies

When Will DigitalOcean Holdings, Inc. (NYSE:DOCN) Breakeven?

With the business potentially at an important milestone, we thought we'd take a closer look at DigitalOcean Holdings, Inc.'s (NYSE:DOCN) future prospects. DigitalOcean Holdings, Inc., through its subsidiaries, operates a cloud computing platform in North America, Europe, Asia, and internationally. With the latest financial year loss of US$44m and a trailing-twelve-month loss of US$30m, the US$9.0b market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which DigitalOcean Holdings will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

DigitalOcean Holdings is bordering on breakeven, according to the 8 American IT analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$10m in 2022. So, the company is predicted to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 120% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growthNYSE:DOCN Earnings Per Share Growth October 11th 2021

We're not going to go through company-specific developments for DigitalOcean Holdings given that this is a high-level summary, though, keep in mind that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one aspect worth mentioning. DigitalOcean Holdings currently has no debt on its balance sheet, which is rare for a loss-making growth company, which typically has high debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of DigitalOcean Holdings to cover in one brief article, but the key fundamentals for the company can all be found in one place – DigitalOcean Holdings' company page on Simply Wall St. We've also put together a list of essential aspects you should further examine:

  1. Valuation: What is DigitalOcean Holdings worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether DigitalOcean Holdings is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on DigitalOcean Holdings’s board and the CEO’s background.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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