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Dropbox (DBX) Stock Before Q2 Earnings: To Buy or Not to Buy?
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Dropbox (DBX - Free Report) is scheduled to report its second-quarter 2024 results on Aug 8.
For the to-be-reported quarter, Dropbox expects revenues between $628 million and $631 million. Non-GAAP operating margin is expected to be roughly 33%.
The Zacks Consensus Estimate for revenues is currently pegged at $629.65 million, suggesting growth of 1.15% from the year-ago quarter’s reported figure.
The consensus mark for earnings is pegged at 52 cents per share, unchanged over the past 30 days and indicating 1.96% growth from the figure reported in the year-ago quarter.
DBX’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the earnings surprise being 13.14%, on average.
Let’s see how things are shaping up prior to this announcement.
Factors to Note
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.
DBX’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. The trend is expected to have continued in the to-be-reported quarter.
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.
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.
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, has been a concern.
DBX Stock Underperforms Sector
Dropbox shares have declined 27% year to date, underperforming the broader Zacks Computer & Technology sector’s return of 14.3% and the Zacks Internet Services’ growth of 12.4%.
DBX has underperformed its industry peers, including Alphabet (GOOGL - Free Report) , DoorDash (DASH - Free Report) and The Trade Desk (TTD - Free Report) over the same timeframe. GOOGL, DASH and TTD shares have returned 14%, 22.6% and 15.6%, respectively.
YTD Performance
Image Source: Zacks Investment Research
However, the Value Style Score of B suggests DBX is undervalued at this moment.
DBX stock is trading at a discount with a forward 12-month Price/Sales of 2.76X compared with the Zacks Internet Services industry’s 5.38X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
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, Salesforce and NVIDIA.
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.
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 strong liquidity position is noteworthy. It expects free cash flow between $910 million and $950 million for 2024. It reported a free cash flow of $759 million in 2023.
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.
Nevertheless, growth prospects are modest in the near term.
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.
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Dropbox (DBX) Stock Before Q2 Earnings: To Buy or Not to Buy?
Dropbox (DBX - Free Report) is scheduled to report its second-quarter 2024 results on Aug 8.
For the to-be-reported quarter, Dropbox expects revenues between $628 million and $631 million. Non-GAAP operating margin is expected to be roughly 33%.
The Zacks Consensus Estimate for revenues is currently pegged at $629.65 million, suggesting growth of 1.15% from the year-ago quarter’s reported figure.
The consensus mark for earnings is pegged at 52 cents per share, unchanged over the past 30 days and indicating 1.96% growth from the figure reported in the year-ago quarter.
DBX’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the earnings surprise being 13.14%, on average.
Dropbox, Inc. Price, Consensus and EPS Surprise
Dropbox, Inc. price-consensus-eps-surprise-chart | Dropbox, Inc. Quote
Let’s see how things are shaping up prior to this announcement.
Factors to Note
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.
DBX’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. The trend is expected to have continued in the to-be-reported quarter.
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.
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.
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, has been a concern.
DBX Stock Underperforms Sector
Dropbox shares have declined 27% year to date, underperforming the broader Zacks Computer & Technology sector’s return of 14.3% and the Zacks Internet Services’ growth of 12.4%.
DBX has underperformed its industry peers, including Alphabet (GOOGL - Free Report) , DoorDash (DASH - Free Report) and The Trade Desk (TTD - Free Report) over the same timeframe. GOOGL, DASH and TTD shares have returned 14%, 22.6% and 15.6%, respectively.
YTD Performance
Image Source: Zacks Investment Research
However, the Value Style Score of B suggests DBX is undervalued at this moment.
DBX stock is trading at a discount with a forward 12-month Price/Sales of 2.76X compared with the Zacks Internet Services industry’s 5.38X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
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, Salesforce and NVIDIA.
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.
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 strong liquidity position is noteworthy. It expects free cash flow between $910 million and $950 million for 2024. It reported a free cash flow of $759 million in 2023.
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.
Nevertheless, growth prospects are modest in the near term.
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.