![]() 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. Note that in FY21, Dropbox already hit north of $700 million in free cash flow, so I think it's highly likely that this original $1 billion target gets replaced with something more aggressive. The fact that Dropbox has routinely dangled a target of hitting $1 billion in annual FCF by FY24 while continuously raising operating margins quarter after quarter is a big draw for investors. Growth and paying premiums for growth stocks are out value is in. Dropbox isn't just trading on a pie-in-the-sky future projection, but on real free cash flow today, singling out from other SaaS stocks in this risk-averse environment.On top of high gross margins, Dropbox has a powerful formula for success. In this macro environment, subscription revenue streams have become even more desirable due to the ease of planning cash flow and the reliability of low-churn customers. Here is my full long-term bull case for Dropbox: In addition, a new "Dropbox Dash" search function uses AI to point users toward recommended content and organize links into a single dashboard. New file preview technology helps users get quick summaries of content without having to parse through entire files. It's worth noting as well that Dropbox has some product-driven catalysts for growth, including and especially in the applications of AI technology. Though certainly no longer an exciting tech stock that is seeing explosive growth rates, Dropbox is making the transition to the later phase of a tech stock's lifecycle: growing profits, and justifying its valuation through earnings and cash flow. I see Dropbox as a category leader in enterprise collaboration and file sharing, and a sturdy company that has found a way to balance consistent growth rates alongside healthy margin expansion. I remain bullishon Dropbox and continue to hold onto the stock in my portfolio, and am raising my price target through the end of the year. ![]() And though Dropbox is now trading at highs not seen since 2021, I'd argue the stock has long been undervalued and has plenty of runway left to rally further.ĭata by YCharts Dropbox's bull case rests on strong cash flows The file sharing software company saw a 6% post-earnings pop, bringing its year-to-date gains above 20%. ![]() As interest rate fears cool down and investors wade back into risk-taking, Q2 fundamental results (which are turning out more beats than misses across the board) are hoping to prove that the rebound is justified.ĭropbox ( NASDAQ: DBX) had a strong showing in Q2. ![]() Earnings season is in full swing and putting a strong test to tech stock rallies. ![]()
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