Dropbox: The Right Stock To Bank On In A Tech Downturn

seekingalpha2021-05-20

Summary Shares of Dropbox are defying malaise in the rest of the tech sector, up ~20% year-to-date. The company just reported a Q1 earnings beat that overachieved on revenue while showing massive ...

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精彩评论

发哥1991
2021-05-20
发哥1991
It is good?
sst9383
2021-05-20
sst9383
good
Gab_Boey
2021-05-20
Gab_Boey
Comment
- Bob2bob:
  Sure i can do thT
- Gab_Boey:
  Tks
Racheltestin
2021-05-20
Racheltestin
Like and comment thanks
- Bob2bob:
  No pRoblemo
Meshaarias72
2021-05-20
Meshaarias72
Like it
Keychain
2021-05-20
Keychain
Pls like and comments. Thanks
- andrew123:
  like yrs u like mine. ok.

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Investors criticized the company for its slowing growth, the fierceness of its competition versus Box (BOX) and Google Drive (GOOG), and the general un-excitingness of its file-sharing product.\nYet that sentiment has turned on a 180-degree axis this year. Suddenly, Dropbox is (quietly) one of the better-performing stocks in the software sector, while all the higher-flying names are still down double-digits (some down to half of their prior highs). Dropbox, on the other hand, is up ~20% year-to-date and is trading near 52-week highs, especially after a recent Q1 earnings print that showed strength across a number of fronts:\nData byYCharts\nThis rally, in my view, is far from letting up. There are two main factors / new updates that I think should continue to propel Dropbox higher in the near term:\n\nCash flow and value orientation is perfect for this cautious stock market.Growth and paying premiums for growth stocks is out; value is in. Dropbox is the bargain basement of the software sector. In addition, the fact that the company 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. We also like the fact that in February, Dropbox unveiled a brand-new $1 billion stock repurchase plan (when the stock was trading closer to the low $20s), which is a significant chunk of Dropbox's ~$10 billion market cap.\nDocSend acquisition opens up a world of possibilities.In March, Dropbox announced and closed the acquisition of a company called DocSend, paying $165 million for it (which I view as a fairly modest price tag for the capacities that DocSend adds to the Dropbox platform). What I find most appealing about DocSend is the fact that it's a widely used tool for confidential information sharing (such as in legal trials or in M&A deals). The addition of an enterprise tool like DocSend will further flex Dropbox's muscles in the enterprise space, helping it catch up to its rival Box (the latter of which has long touted superior security capabilities). DocSend also makes a welcome addition to Dropbox's growing portfolio of collaboration tools, alongside HelloSign (a direct competitor to DocuSign). Like the rest of Dropbox's product portfolio, DocSend has a range of plans and pricing for users of various budgets and levels of sophistication, giving it immediate cross-sell applicability to all segments of Dropbox's customer base:\n\nFigure 1. DocSend pricing tiers\nSource: Dropbox Q1 investor presentation\nIn short, Dropbox has growth levers (both organically through continued user additions in its core platform, plus acquisitions like DocSend) as well as margin/cash flow appeal. In spite of these strengths, Dropbox still trades at an incredibly attractive valuation (even after this year's 20% rally).\nAt current share prices near $26, Dropbox has a $10.58 billion market cap. After netting off the $1.92 billion of cash and $1.37 billion of debt on Dropbox's most recent balance sheet, the company's enterprise value is $10.03 billion.\nFor the current fiscal year, Dropbox has guided to $2.12-$2.13 billion in revenue, representing 11% y/y growth (a raised estimate, by the way, versus the 9-10% y/y range Dropbox had offered up in Q4).\nFigure 2. Dropbox FY21 guidance update\nSource: Dropbox Q1 earnings release\nVersus the midpoint of this revenue guide, Dropbox trades at a valuation of just4.7x EV/FY21 revenue-one of the cheapest valuation multiples in the software sector. I also like to frequently anchor Dropbox's valuation against its eventual annual cash flow target of $1 billion by FY24 - the fact that Dropbox trades at only ~10x that cash flow is another reason to stay invested in the stock under $30.\nIn short, I find a number of reasons to stay invested in Dropbox, including its profit growth/cash flow targets, new products like DocSend that can help accelerate Dropbox's enterprise strength, and its low valuation/stock buyback tailwinds. Keep riding the upward momentum here.\nQ1 download\nLet's now discuss Dropbox's latest fiscal first-quarter results in greater detail. The Q1 earnings summary is shown below:\nFigure 3. Dropbox Q1 results\nSource: Dropbox Q1 earnings release\nDropbox grew revenue at a 12% y/y pace to $511.6 million in the quarter, beating Wall Street's revenue expectations of $505.2 million (+11% y/y). The company's growth has more or less tracked alongside the same low-teens pace at which it has been growing over the past several quarters (Dropbox's growth clocked in at 13% y/y in Q4).\nUser growth has continued at a stable pace. The company ended the quarter with 15.83 million total paid users, adding 350k net-new users in the quarter (that represents an acceleration versus 230k net-new adds in Q4). We also like the fact that Dropbox's ARR has risen to $2.11 billion. Note that this represents a huge chunk of Dropbox's $2.12-$2.13 billion revenue guidance range for the year. Assuming low churn as a given, the company has almost perfect revenue visibility (which would suggest that any incremental or unexpected growth from new products like DocSend would be purely incremental to Dropbox's stated guidance).\nFigure 4. Dropbox key metrics\nSource: Dropbox Q1 investor presentation\nOne important update here is that Dropbox has made a substantial overhaul to its website and the way it places its paid products in free users' pages, giving Dropbox a greater opportunity to convert trial users into paid plans. Because Dropbox leans primarily on its self-service channel (users buying Dropbox plans of their own accord, without a sales rep), these small UI tweaks are critical for optimizing sales. Dropbox's CFO, Tim Regan, noted that this has resulted in higher conversion rates and drove better-than-expected revenue performance. Per Regan's prepared remarks on the Q1 earnings call:\n\n On the self-serve side, we've recently made meaningful improvements to the way our users discover and purchase paid SKUs. Now our web pages more clearly surface our selection of paid plans as well as the corresponding features each plan offers. This has helped SMBs adopt our Pro plan, which offers robust functionality for sharing, transfer and file requests. These improvements have also helped our individual users to discover and migrate to our new family plan.\n\n\n In Q1, we saw a resulting improvement in conversion rates stemming from these changes, helping to drive our revenue performance.\n\nDropbox's free cash flow also kicked off FY21 with a bang. FCF grew more than 4x y/y to $115.7 million, representing a 21.3% FCF margin (up more than fifteen points from the year-ago quarter). The company cited operating leverage in each of its three spending buckets (R&D, sales and marketing, and general overhead - though it notes that some marketing initiatives were merely deferred and will be made up for in the back half of 2021). In addition to these operating cost improvements, Dropbox also achieved a two-point increase in pro forma gross margins, driven by economies of scale with Dropbox's backend infrastructure.\nFigure 5. Dropbox FCF and margin trends\nSource: Dropbox Q1 earnings release\nWe note that we assume ~10% y/y revenue growth for Dropbox each year through FY24, it would generate $2.83 billion in revenue that year and need a ~35% FCF margin to hit its $1 billion annual FCF target. These margin improvements are a major step in the right direction.\nKey takeaways\nDropbox remains a long-term hold in my portfolio, and it's a perfect way to maintain exposure to the tech sector with a low-risk, cheaply-valued stock at a time when investors have become allergic to nosebleed valuations. Stay long here.","kind":"news","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":130179694,"gmtCreate":1621520859418,"gmtModify":1634188438038,"author":{"id":"3570680486847650","authorId":"3570680486847650","name":"发哥1991","avatar":"https://static.tigerbbs.com/fd7a603ab915f1c22c7a2a237b86de6f","vip":1,"crmLevel":8,"crmLevelSwitch":0,"idStr":"3570680486847650","authorIdStr":"3570680486847650"},"htmlText":"It is good?","listText":"It is good?","text":"It is good?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/130179694","repostId":1176117092,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":130144262,"gmtCreate":1621520759956,"gmtModify":1634188440366,"author":{"id":"3583752155736395","authorId":"3583752155736395","name":"sst9383","avatar":"https://static.tigerbbs.com/b77b7063d240f294d93107753a3e9b44","vip":1,"crmLevel":4,"crmLevelSwitch":0,"idStr":"3583752155736395","authorIdStr":"3583752155736395"},"htmlText":"good","listText":"good","text":"good","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/130144262","repostId":1176117092,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":130160826,"gmtCreate":1621519334365,"gmtModify":1634188469819,"author":{"id":"3579833810423165","authorId":"3579833810423165","name":"Gab_Boey","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3579833810423165","authorIdStr":"3579833810423165"},"htmlText":"&nbsp;Comment","listText":"&nbsp;Comment","text":"Comment","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":2,"repostSize":0,"link":"https://laohu8.com/post/130160826","repostId":1176117092,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4391570,"gmtCreate":1621519418484,"gmtModify":1635404488963,"authorId":3574761564200146,"author":{"id":3574761564200146,"idStr":"3574761564200146","authorId":3574761564200146,"name":"Bob2bob","avatar":"https://static.tigerbbs.com/244c0ca4952190f68e4350e5b6172dd9","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":130160826,"type":1,"supId":0,"prevId":0,"content":"Sure i can do thT","text":"Sure i can do thT","html":"Sure i can do thT"},{"id":4391580,"gmtCreate":1621519444484,"gmtModify":1635404488084,"authorId":3579833810423165,"author":{"id":3579833810423165,"idStr":"3579833810423165","authorId":3579833810423165,"name":"Gab_Boey","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":130160826,"type":1,"supId":4391570,"prevId":0,"content":"Tks","text":"Tks","html":"Tks"}],"langContent":"EN"},{"id":130119192,"gmtCreate":1621518483116,"gmtModify":1634188482528,"author":{"id":"3570069153864313","authorId":"3570069153864313","name":"Racheltestin","avatar":"https://static.tigerbbs.com/83746feea9af3c17ae42ff00d7ca9254","vip":1,"crmLevel":4,"crmLevelSwitch":0,"idStr":"3570069153864313","authorIdStr":"3570069153864313"},"htmlText":"Like and comment thanks&nbsp;","listText":"Like and comment thanks&nbsp;","text":"Like and comment thanks","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":1,"repostSize":0,"link":"https://laohu8.com/post/130119192","repostId":1176117092,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4391577,"gmtCreate":1621519434737,"gmtModify":1635404488307,"authorId":3574761564200146,"author":{"id":3574761564200146,"idStr":"3574761564200146","authorId":3574761564200146,"name":"Bob2bob","avatar":"https://static.tigerbbs.com/244c0ca4952190f68e4350e5b6172dd9","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":130119192,"type":1,"supId":0,"prevId":0,"content":"No pRoblemo","text":"No pRoblemo","html":"No pRoblemo"}],"langContent":"EN"},{"id":130131462,"gmtCreate":1621518163156,"gmtModify":1634188487535,"author":{"id":"3577781617271173","authorId":"3577781617271173","name":"Meshaarias72","avatar":"https://static.tigerbbs.com/c5282cda6a9d3948fc067b21adcb578c","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3577781617271173","authorIdStr":"3577781617271173"},"htmlText":"Like it","listText":"Like it","text":"Like it","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/130131462","repostId":1176117092,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":130196059,"gmtCreate":1621517778671,"gmtModify":1634188492446,"author":{"id":"3571801721484161","authorId":"3571801721484161","name":"Keychain","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":8,"crmLevelSwitch":0,"idStr":"3571801721484161","authorIdStr":"3571801721484161"},"htmlText":"Pls like and comments. Thanks&nbsp;","listText":"Pls like and comments. Thanks&nbsp;","text":"Pls like and comments. Thanks","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":1,"repostSize":0,"link":"https://laohu8.com/post/130196059","repostId":1176117092,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4395270,"gmtCreate":1621554198632,"gmtModify":1635404210830,"authorId":3576260758860416,"author":{"id":3576260758860416,"idStr":"3576260758860416","authorId":3576260758860416,"name":"andrew123","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":5,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":130196059,"type":1,"supId":0,"prevId":0,"content":"like yrs u like mine. ok.","text":"like yrs u like mine. ok.","html":"like yrs u like mine. ok."}],"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":55,"commentSize":11,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":false,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"laohu8","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1176117092"}