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Dropbox (DBX) Up 8.4% in a Month: How Should You Play the Stock?
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Dropbox’s (DBX - Free Report) shares have gained 8.4% in the past month, outperforming the broader Zacks Computer & Technology sector’s return of 2.5% and the Zacks Internet Services’ growth of 4.6%.
DBX’s closing price of $22.68 on Jun 12 is closer to the lower end of the 52-week range of $20.68-$33.43, reflecting ample room for the upside.
Dropbox’s expanding AI-powered product portfolio has been a key catalyst in driving up the paid user base. Its strategy of leveraging AI to develop products that organize all cloud content on a single platform is a positive.
DBX exited the first quarter of 2024 with 18.16 million paying users, marking sequential growth of roughly 35,000. As of Mar 31, 2024, DBX had more than 700 million registered users.
One Month Performance
Image Source: Zacks Investment Research
Moreover, Dropbox’s offerings that help in effective team collaboration have been driving business user growth. As of Mar 31, 2024, it had roughly 575K business teams, and 34% of paying users were business teams.
Innovation & Strong Partner Base Aid Prospects
Dropbox is benefiting from an innovative portfolio and strong partner base that includes the likes of Google, Slack, Adobe, Atlassian, Zoom, Microsoft (MSFT - Free Report) , Salesforce (CRM - Free Report) and NVIDIA (NVDA - Free Report) .
Dropbox’s product offerings, like Dropbox Dash and Dropbox AI, have been gaining strong adoption. Dropbox Dash allows users to quickly find everything in one place, including content that is pulled from Microsoft Outlook, Google Workspace or Asana.
Image Source: Dropbox
Dash’s latest enhancements improve search functionality and help customers get answers much faster. The latest update made the solution capable of searching by keywords and semantic search, which provides more contextually relevant search results.
DBX has added new security, organization and sharing features, as well as real-time co-authoring integrations with Microsoft 365. Microsoft Copilot Integration now gives users the ability to query their Dropbox files directly from within Microsoft Teams. The latest security update offers an advanced data protection feature that adds an extra layer of protection.
Moreover, Dropbox has updated its other notable solutions, including DocSend and Replay. In April, it added features like Advanced Data Room (share multiple data files single link), viewing permission, user verification and built-in NDAs in DocSend. Replay integrations with Adobe After Effects, Apple Final Cut Pro and Avid Pro Tools are now available for users.
Dropbox’s collaboration with NVIDIA expands its extensive AI functionality with new uses for personalized generative AI. This improves search accuracy, provides better organization, and simplifies workflows for its customers across its cloud content. DBX leverages NVIDIA’s AI foundry to enhance its latest AI-powered products, including Dropbox Dash and Dropbox AI.
Dropbox’s 2024 View Strong
For 2024, Dropbox expects revenues between $2.535 billion and $2.55 billion. At constant currency, revenues are expected between $2.532 billion and $2.547 billion.
DBX expects a modest increase in Average Revenue Per User for 2024, driven by strong adoption of its premium plans.
The Zacks Consensus Estimate for 2024 revenues is pegged at $2.54 billion, indicating year-over-year growth of 1.66%. The consensus mark for earnings is pegged at $2.12 per share, unchanged over the past 30 days and indicates 7.07% year-over-year growth.
Estimate Revision
Image Source: Zacks Investment Research
The company expects gross margin to be in the 83-83.5% range for the full year. Non-GAAP operating margin is expected in the 32.5-33% range.
Dropbox expects free cash flow between $910 million and $950 million for 2024. It reported a free cash flow of $759 million in 2023. Strong liquidity is helping Dropbox pursue shareholder-friendly activity. At the end of the first quarter of 2024, Dropbox had $1.1 billion remaining under its current share repurchase authorization.
Conclusion
Dropbox’s strong portfolio, which leverages AI and a strong partner base, is positive. Its growth prospect, as indicated by the Growth Style Score of A, is hard to ignore.
The Value Style Score of B also suggests DBX is undervalued at this moment.
However, Dropbox suffers from a challenging macroeconomic condition that has particularly impacted the small and medium business cohort. Its strategy of de-emphasizing the Family plan is expected to hurt user growth in the near term. Weakness in the FSS business, which includes Teams business, is a concern.
Dropbox currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for more favorable entry points in the stock. However, investors who already own the stock might expect the company's growth prospects to be rewarding over a longer term.
Image: Bigstock
Dropbox (DBX) Up 8.4% in a Month: How Should You Play the Stock?
Dropbox’s (DBX - Free Report) shares have gained 8.4% in the past month, outperforming the broader Zacks Computer & Technology sector’s return of 2.5% and the Zacks Internet Services’ growth of 4.6%.
DBX’s closing price of $22.68 on Jun 12 is closer to the lower end of the 52-week range of $20.68-$33.43, reflecting ample room for the upside.
Dropbox’s expanding AI-powered product portfolio has been a key catalyst in driving up the paid user base. Its strategy of leveraging AI to develop products that organize all cloud content on a single platform is a positive.
DBX exited the first quarter of 2024 with 18.16 million paying users, marking sequential growth of roughly 35,000. As of Mar 31, 2024, DBX had more than 700 million registered users.
One Month Performance
Moreover, Dropbox’s offerings that help in effective team collaboration have been driving business user growth. As of Mar 31, 2024, it had roughly 575K business teams, and 34% of paying users were business teams.
Innovation & Strong Partner Base Aid Prospects
Dropbox is benefiting from an innovative portfolio and strong partner base that includes the likes of Google, Slack, Adobe, Atlassian, Zoom, Microsoft (MSFT - Free Report) , Salesforce (CRM - Free Report) and NVIDIA (NVDA - Free Report) .
Dropbox’s product offerings, like Dropbox Dash and Dropbox AI, have been gaining strong adoption. Dropbox Dash allows users to quickly find everything in one place, including content that is pulled from Microsoft Outlook, Google Workspace or Asana.
Dash’s latest enhancements improve search functionality and help customers get answers much faster. The latest update made the solution capable of searching by keywords and semantic search, which provides more contextually relevant search results.
DBX has added new security, organization and sharing features, as well as real-time co-authoring integrations with Microsoft 365. Microsoft Copilot Integration now gives users the ability to query their Dropbox files directly from within Microsoft Teams. The latest security update offers an advanced data protection feature that adds an extra layer of protection.
Moreover, Dropbox has updated its other notable solutions, including DocSend and Replay. In April, it added features like Advanced Data Room (share multiple data files single link), viewing permission, user verification and built-in NDAs in DocSend. Replay integrations with Adobe After Effects, Apple Final Cut Pro and Avid Pro Tools are now available for users.
Dropbox’s collaboration with NVIDIA expands its extensive AI functionality with new uses for personalized generative AI. This improves search accuracy, provides better organization, and simplifies workflows for its customers across its cloud content. DBX leverages NVIDIA’s AI foundry to enhance its latest AI-powered products, including Dropbox Dash and Dropbox AI.
Dropbox’s 2024 View Strong
For 2024, Dropbox expects revenues between $2.535 billion and $2.55 billion. At constant currency, revenues are expected between $2.532 billion and $2.547 billion.
DBX expects a modest increase in Average Revenue Per User for 2024, driven by strong adoption of its premium plans.
The Zacks Consensus Estimate for 2024 revenues is pegged at $2.54 billion, indicating year-over-year growth of 1.66%. The consensus mark for earnings is pegged at $2.12 per share, unchanged over the past 30 days and indicates 7.07% year-over-year growth.
Estimate Revision
The company expects gross margin to be in the 83-83.5% range for the full year. Non-GAAP operating margin is expected in the 32.5-33% range.
Dropbox expects free cash flow between $910 million and $950 million for 2024. It reported a free cash flow of $759 million in 2023. Strong liquidity is helping Dropbox pursue shareholder-friendly activity. At the end of the first quarter of 2024, Dropbox had $1.1 billion remaining under its current share repurchase authorization.
Conclusion
Dropbox’s strong portfolio, which leverages AI and a strong partner base, is positive. Its growth prospect, as indicated by the Growth Style Score of A, is hard to ignore.
The Value Style Score of B also suggests DBX is undervalued at this moment.
However, Dropbox suffers from a challenging macroeconomic condition that has particularly impacted the small and medium business cohort. Its strategy of de-emphasizing the Family plan is expected to hurt user growth in the near term. Weakness in the FSS business, which includes Teams business, is a concern.
Dropbox currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for more favorable entry points in the stock. However, investors who already own the stock might expect the company's growth prospects to be rewarding over a longer term.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.