Accordingly, Dropbox has differentiated itself from Box by appealing to these professional solo acts and small businesses, which is reflected by Dropbox's greater upsells to premium paid plans. Tools like Dropbox have become necessary infrastructure, and one with very low barriers to entry and ease of setup. More and more freelancers have emerged from the pandemic, untethering themselves from a corporate lifestyle and building brands and businesses of their own. YTD free cash flow margins of 34% are up eleven points versus the prior year, which is a huge accomplishment. The fact that Dropbox has routinely dangled a target of hitting $1 billion in annual FCF by FY24 (roughly double current cash flow levels) while continuously raising operating margins quarter after quarter is a big draw for investors. Growth and paying premiums for growth stocks is out value is in. Cash flow star will make for a guilt-free investment during a more risk-averse market environment.As a reminder to investors on what I believe the key tailwinds for this company are: Now that Dropbox has dropped below $25 and seems to have found a resistance/floor at these levels, I think it's time to reconsider the bullish thesis on Dropbox. I recommended back then that investors lock in gains and wait until Dropbox hits the mid-$20s before buying in. At its peaks, Dropbox traded at ~5.5-6.0x forward revenue, a huge premium to Box (whose growth rate is now at parity with Dropbox in the low teens). In mid-August, I published an article on Dropbox ( DBX) downgrading the stock to neutral (whereas previously I had been incredibly bullish on the name) due to valuation concerns: Dropbox's primary appeal, and likely the biggest cause behind its YTD rally, was due to the fact that its valuation lagged markedly behind most software peers of a similar growth pace. Since the start of calendar Q4, shares of Dropbox have dropped ~25% from YTD highs, warranting a hard second look at this stock: Data by YCharts And like rival Box, Dropbox has made an acquisition of an e-sign company DocSend in order to compete more fully with Dropbox. Its customer growth is slower than that, but Dropbox has been successful at converting more and more of its consumer customers to higher-end, professional-grade plans. Its growth has held steadily to the low-teens mark. At one point, shares of Dropbox had been up ~50% on the year, before the stock came tumbling down alongside other small and mid-cap tech growth stocks in the final quarter of 2021.įundamentally, Dropbox has kept chugging along - giving investors neither major cause for excitement nor concern.
This year, investors had initially been very high on Dropbox ( NASDAQ: DBX), the file storage and collaboration software company that competes alongside Box ( BOX) and Google Drive ( GOOG).
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