Dropbox (NASDAQ: DBX) is scheduled to announce Q2 earnings results on Thursday, August 6th, after market close.
Dropbox (NASDAQ: DBX) went public in March 2018 at $21 per share, surged to nearly $40 just three months later, then gradually gave up those gains and settled back to the low $20s. The cloud storage service provider initially impressed the bulls with its robust growth in users and revenue. But after a few quarters, its decelerating growth, lack of profits, and narrow moat attracted the bears.
For now, Dropbox’s fate remains uncertain as its stock hovers near its IPO price. Let’s take a fresh look at this oft-overlooked cloud player to see if it’s more attractive to the bulls or bears.
An early mover in the cloud storage space:
Dropbox provides free and paid cloud storage services for individuals and enterprise customers. Its free tier offers individual users 2GB of cloud storage. It’s $9.99 per month plan (billed annually) offers 2TB of storage, and it’s $16.58 per month plan offers 3TB. It also offers variable business plans tailored to a company’s size and needs.
Dropbox and its rival Box (NYSE: BOX) were both early movers in the cloud storage market, but both companies now face fierce competition from Alphabet’s Google, Microsoft, and Amazon — which all host similar cloud storage services.
Those tech giants can afford to bundle their cloud storage services with other products at cheaper prices. However, Dropbox and Box remain popular choices for companies that don’t want to tether themselves to Google, Microsoft, and Amazon’s tech ecosystems.
How fast is Dropbox growing?
CEO Drew Houston noted the COVID-19 crisis brought more clients to the platform instead of disrupting its business. Between mid-March and its last report in early May, daily Dropbox Business team trials rose about 40% over pre-pandemic levels. Dropbox also added new integrated features for Zoom Video Communication’s (NASDAQ: ZM) popular video conferencing service, and those tools experienced a 20-fold jump in usage between February and April.
Dropbox attributed its gross margin improvement to its expanding scale and infrastructure and expects that expansion to continue for the full year. Lower marketing expenses, which are attributed to “greater efficiencies” in spending, lifted its operating margin.
Those higher margins, along with its stable revenue growth, enabled Dropbox to post a GAAP profit of $39.3 million in the first quarter, marking its first-ever quarter of GAAP profitability. Furthermore, Dropbox expects to remain profitable on a GAAP basis for the full year — while its rival Box remains deep in the red.
A rosy forecast and a reasonable valuation:
Dropbox expects its second-quarter revenue to rise 15%-16% annually, and for its non-GAAP operating margin to expand to 16.5%-17.5%. For the full year, it expects its revenue to grow 13%-15%, and for its non-GAAP operating margin to rise to 17.5%-18%.
Dropbox didn’t provide any earnings guidance, but Wall Street expects its non-GAAP earnings to rise 46% for the year — which is a high growth rate for a stock that trades at 31 times forward earnings.
Dropbox’s stable growth and expanding margins suggest its moat is wide enough to fend off its bigger challengers. Its stock remains surprisingly cheap relative to its growth, and I believe it could attract more bulls if it meets or beats its own guidance with its third-quarter report on Aug. 6.
*The consensus EPS Estimate is $0.17 (+70.0% Y/Y) and the consensus Revenue Estimate is $465.41M (+15.9% Y/Y).
*Over the last 2 years, DBX has beaten EPS estimates 100% of the time and has beaten revenue estimates 100% of the time.
*Over the last 3 months, EPS estimates have seen 11 upward revisions and 0 downward. Revenue estimates have seen 9 upward revisions and 2 downward.
All information on this website is of a general nature. The information is not adapted to conditions that are specific to your person or entity. The information provided can not be considered as personal, professional or legal advice or investment advice to the user.
Signal Factory is not represented as a registered investment consultant or brokerage dealer nor offers to buy or sell any of the financial instruments mentioned in the service offered.
While Signal Factory believes that the content provided is accurate, there are no explicit or implied warranties of accuracy. The information provided is believed to be reliable; Signal Factory does not guarantee the accuracy or completeness of the information provided. Third parties refer to Signal Factory to provide technology and information if a third party fails, and then there is a risk that the information may be delayed or not delivered at all.
All information and comments contained on this website, including but not limited to, opinions, analyzes, news, prices, research, and general, do not constitute investment advice or an invitation to buy or sell any type of instrument. Signal Factory assumes no responsibility for any loss or damage that may result, directly or indirectly, from the use or dependence on such information.
All information contained on this web site is a personal opinion or belief of the author. None of these data is a recommendation or financial advice in any sense, also within the meaning of any commercial act or law. Writers, publishers and affiliates of Signal Factory are not responsible for your trading in any way.
The information and opinions contained in the site are provided for information only and for educational reasons, should never be considered as direct or indirect advice to open a trading account and / or invest money in Forex trading with any Forex company . Signal Factory assumes no responsibility for any decisions taken by the user to create a merchant account with any of the brokers listed on this website. Anyone who decides to set up a merchant account or use the services, free of charge or paid, to any of the Forex companies mentioned on this website, bears full responsibility for their actions.
Any institution that offers a service and is listed on this website, including forex brokers, financial companies and other institutions, is present only for informational purposes. All ratings, ratings, banners, reviews, or other information found for any of the above-mentioned institutions are provided in a strictly objective manner and according to the best possible reflection of the materials on the official website of the company.
Forex trading is potentially high risk and may not be suitable for all investors. The high level of leverage can work both for and against merchants. Before each Forex investment, you should carefully consider your goals, past experience and risk level. The opinions and data contained on this site should not be considered as suggestions or advice for the sale or purchase of currency or other instruments. Past results do not show or guarantee future results.
Neither Signal Factory nor its affiliates ensure the accuracy of the content provided on this Site. You explicitly agree that viewing, visiting or using this website is at your own risk.