11:55 AM EDT, 05/22/2024 (MT Newswires) -- DigitalOcean Holdings ( DOCN ) is facing near-term uncertainty related to the spending trends of small to medium businesses, given the smaller nature of its existing customer segment and competition in the cloud infrastructure market, UBS Securities said in a Tuesday note as it initiated coverage on the company.

"Given the much smaller nature of DigitalOcean's ( DOCN ) customers, their primary customer segment is likely much more sensitive

to broader macroeconomic conditions, changes in pricing, and able to alter spending patterns more quickly by lacking multi-year contracts amongst enterprise customers," according to the note.

While DigitalOcean ( DOCN ) caters to the "underserved market of small and midsize businesses," the competition with peers could limit its growth as historical data showed slower revenue growth compared with bigger companies, UBS said.

According to UBS, DigitalOcean's ( DOCN ) easy-to-use interface and transparent pricing could drive the company's topline growth this year.

UBS Securities assigned a neutral rating and a $40 price target on DigitalOcean's ( DOCN ) stock.

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