Needham & Company analysts downgraded DigitalOcean (DOCN) shares to Hold from Buy as they argue the company is operating in an increasingly challenging macro environment.
DOCN stock is down 4.5% in pre-market Tuesday.
The downgrade call is made after rival OVH Groupe lowered its FY23 Revenue guidance by 150 basis points at the midpoint to 13%-14% growth. The analysts highlighted the commentary:
“In March and so far in April, we have seen signs that some clients are taking longer to conclude contracts,” the OVH management said.
The analysts also highlighted comments from Amazon (NASDAQ:AMZN) CEO Andy Jassy about cautious spending behavior.
In addition to DigitalOcean’s March 31 fillings, the analysts conclude that the company’s guidance and consensus estimates that assume stronger intra-quarter revenue growth are at risk.
DOCN stock is up 29% year-to-date.