Dropbox DBX topped our first quarter fiscal 2020 financial results on May 7, and shares of the cloud storage firm have jumped 20% in 2020, against the S&P 500’s 12% slide. Now the question is will the coronavirus finally help Dropbox stock shine after struggling for two years as a public company?
Dropbox’s Elevator Pitch
Dropbox is a cloud storage firm that has expanded beyond file hosting into what it calls a “collaboration platform.” The company competes in the broader cloud-storage and collaboration space against tech giants such as Google GOOGL and Microsoft MSFT.
DBX closed the quarter with over 600 million global users and 14.6 million paying users, up 11% from the year-ago period. But many of its users are still consumers, and Wall Street wants it to prove it can attract more business users to help it continue to grow within the cloud space for years to come.
With this in mind, Dropbox posted its first-ever quarter of GAAP profitability in Q1, which ended on March 31. Meanwhile, its adjusted quarterly earnings of $0.17 share easily topped our Zacks consensus estimate and soared 70% from the year-ago period. DBX’s quarterly revenue also jumped 18% to reach $455 million.
Before we look ahead, we need to see what DBX stock has done. Dropbox went public in March 2018 at an IPO price of $21 per share. Dropbox stock surged on its market debut, but it is down around 25% overall, despite a solid showing in the first few months.
Dropbox shares have climbed 12% in the last six months. More recently, DBX has jumped 20% in 2020 and over 35% since March 12. The stock closed regular trading Thursday at $21.50 a share, which gives it 18% more room to run before it hits its 52-week highs.
Along with its ‘cheap’ price, Dropbox is trading at discount compared to its industry’s average in terms of forward 12-months Zacks sales estimates at 4.6X vs. 6.7X.
DBX is also part of a larger group of stocks that could benefit from the current stay-at-home environment that includes Zoom ZM, Netflix NFLX, and many others. Plus, the broader tech space has so far proven resilient to the coronavirus earnings downturn (also read: Covid-19 Pandemic Weighs on the Earnings Picture).
Our Zacks estimates call for DBX’s second quarter earnings to climb 16%. Peeking ahead, the company’s full-year revenue is projected to jump 14% to $1.89 billion. This would mark solid growth on top of 2019’s 19% sales expansion.
At the bottom end of the income statement, Dropbox’s adjusted Q2 EPS figure is projected to soar 60% to reach $0.16 a share. The company’s full-year fiscal 2020 earnings are then expected to jump nearly 50% to $0.74 a share.
Dropbox is currently a Zacks Rank #1 (Strong Buy) that rocks an “A” grade for Growth and a “B” for Momentum in our Style Scores system. DBX is also part of an industry that rests in the top 12% of our more than 250 Zacks industries, and it might be worth taking a small bite out of at the moment.
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