Spotify Technology (NYSE:SPOT) & DigitalOcean (NYSE:DOCN) Financial Analysis

DigitalOcean (NYSE:DOCN) and Spotify Technology (NYSE:SPOT) are both computer and technology companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, profitability, valuation, analyst recommendations, dividends, earnings and risk.

Profitability

This table compares DigitalOcean and Spotify Technology’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
DigitalOcean	28.76%	-127.00%	8.88%
Spotify Technology	13.16%	31.35%	16.28%

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for DigitalOcean and Spotify Technology, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
DigitalOcean	0	5	9	0	2.64
Spotify Technology	0	8	24	2	2.82

DigitalOcean presently has a consensus price target of $72.08, suggesting a potential downside of 15.71%. Spotify Technology has a consensus price target of $697.26, suggesting a potential upside of 45.87%. Given Spotify Technology’s stronger consensus rating and higher probable upside, analysts plainly believe Spotify Technology is more favorable than DigitalOcean.

Valuation & Earnings

This table compares DigitalOcean and Spotify Technology”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
DigitalOcean	$901.43 million	8.73	$259.26 million	$2.53	33.80
Spotify Technology	$17.19 billion	5.73	$2.50 billion	$9.64	49.59

Spotify Technology has higher revenue and earnings than DigitalOcean. DigitalOcean is trading at a lower price-to-earnings ratio than Spotify Technology, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

49.8% of DigitalOcean shares are held by institutional investors. Comparatively, 84.1% of Spotify Technology shares are held by institutional investors. 1.0% of DigitalOcean shares are held by insiders. Comparatively, 0.4% of Spotify Technology shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Volatility and Risk

DigitalOcean has a beta of 1.76, suggesting that its stock price is 76% more volatile than the S&P 500. Comparatively, Spotify Technology has a beta of 1.66, suggesting that its stock price is 66% more volatile than the S&P 500.

Summary

Spotify Technology beats DigitalOcean on 11 of the 15 factors compared between the two stocks.

About DigitalOcean

DigitalOcean Holdings, Inc., through its subsidiaries, operates a cloud computing platform in North America, Europe, Asia, and internationally. The company’s platform provides on-demand infrastructure and platform tools for developers, start-ups, and small and growing digital businesses. It also offers infrastructure-as-a-service (IaaS) solutions comprising compute and storage services, as well as networking projects, including Cloud Firewalls software, Managed Load Balancers software, and Virtual Private Cloud (VPC). The company also provides platform-as-a-service (PaaS) solutions, such as managed databases; managed Kubernetes and container registry; application platform to build, deploy, and scale applications; Functions, a serverless compute solution; and Uptime for real-time uptime and latency alerts, as well as software-as-a-service (SaaS), including managed hosting and DigitalOcean Marketplace, a platform where developers can find pre-configured applications and solutions. In addition, it offers artificial intelligence (AI)/machine learning (ML) applications comprising GPU virtual machines for scaling AI applications; Notebooks, a simple cloud workspace that runs on GPUs that provides a managed interactive development environment for exploring data, and training and building machine learning models; and Deployments for deploying their machine learning model as an API endpoint. The company’s customers include software engineers, researchers, data scientists, system administrators, students, and hobbyists. Its customers use its platform in various industry verticals and for a range of use cases, such as web and mobile applications, website hosting, e-commerce, media and gaming, personal web projects, managed services, and AI/ML applications. DigitalOcean Holdings, Inc. was incorporated in 2012 and is headquartered in New York, New York.

About Spotify Technology

Spotify Technology S.A., together with its subsidiaries, provides audio streaming subscription services worldwide. It operates through two segments, Premium and Ad-Supported. The Premium segment offers unlimited online and offline streaming access to its catalog of music and podcasts without commercial breaks to its subscribers. This segment sells directly to the end users. The Ad-Supported segment provides on-demand online access to its catalog of music and unlimited online access to the catalog of podcasts to its users on their computers, tablets, and compatible mobile devices. The company also offers sales, distribution and marketing, contract research and development, and customer and other support services. Spotify Technology S.A. was incorporated in 2006 and is based in Luxembourg City, Luxembourg.