Citi analysts initiated coverage of DigitalOcean (NYSE:DOCN) with a Buy rating and a $45 price target, citing the company’s renewed strategic focus and multiple avenues for sustainable growth.

DigitalOcean’s topline performance faced significant headwinds in 2022-23 due to widening gaps in its product portfolio and declining customer engagement, further compounded by broader macroeconomic pressures. In response, the company undertook a complete overhaul of its leadership team, appointing a technically driven C-Suite to refocus on its developer-oriented roots and implement a product-led growth (PLG) strategy.

The new leadership team, while relatively new to public company management, is already making headway through an enhanced product roadmap and go-to-market strategies. These efforts aim to position DigitalOcean as a differentiated player in the fragmented and highly commoditized cloud infrastructure market. The analysts note that the ongoing turnaround might take time to fully materialize, but early results from the company’s strategic initiatives underscore its potential.

DigitalOcean has several identifiable growth drivers, including re-engaging its existing customer base, upselling opportunities, winning lower-tier clients from hyperscale competitors, and ramping up efforts to expand its top-of-funnel reach. These initiatives could contribute to consistent topline growth and margin improvements, enhancing its competitive standing in the cloud space.