DigitalOcean (DOCN): A Mighty Mid-Cap Poised for Growth in 2025
As we approach the end of 2024, it’s time for investors to start thinking about which stocks to carry into 2025. Artificial intelligence (AI) will undoubtedly continue to be a dominant theme, and one mid-cap company competing in this space is DigitalOcean (DOCN), a cloud services provider catering to small and mid-sized businesses (SMBs).
DigitalOcean may not have the trillion-dollar market cap of industry giants like Amazon Web Services, Microsoft Azure, or Google Cloud, but it’s carving out its own niche by focusing on the SMB segment that the big players often overlook. With its market cap still under $4 billion, DigitalOcean provides cost-effective and transparent pricing, simplified deployment tools, and highly personalized service to SMBs—especially those in the start-up phase. This makes it the go-to cloud provider for smaller companies that don’t have the resources for in-house technical staff.
What’s more, DigitalOcean has been growing its portfolio of AI services, bolstered by cutting-edge data center infrastructure and chips from Nvidia. While the company’s focus remains on SMBs, DigitalOcean’s growing presence in the AI space could provide significant tailwinds moving into 2025, especially as demand for AI-driven cloud services increases.
Currently, DigitalOcean stock is trading near its lowest valuation in company history, based on a key valuation metric. With 474,000 of its 638,000 customers spending an average of just $15 a month, there’s plenty of room for growth as the company attracts more high-value customers. In fact, its 18,000 “scalers”—customers that spend an average of $2,153 a month—account for more than half of its monthly revenue, highlighting the potential for significant revenue expansion.
With a solid business model, growth potential in AI, and a market price near historic lows, DigitalOcean is an intriguing buy for those looking to add exposure to the cloud sector heading into 2025.
