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Dropbox (DBX) to Post Q2 Earnings: What's in the Offing?

Zacks Equity Research
·3 min read

Dropbox DBX is slated to report second-quarter 2020 results on Aug 6.

For the second quarter, the company expects revenues between $463 million and $466 million. The Zacks Consensus Estimate for revenues is pegged at $464.7 million, which indicates growth of 15.7% from the year-ago reported figure.

Moreover, the consensus mark for second-quarter earnings has remained unchanged at 17 cents per share over the past 30 days. This suggests growth of 70% from the prior-year quarter.

Dropbox, Inc. Price and EPS Surprise

Dropbox, Inc. Price and EPS Surprise
Dropbox, Inc. Price and EPS Surprise

Dropbox, Inc. price-eps-surprise | Dropbox, Inc. Quote

Notably, the company beat estimates in each of the trailing four quarters, the average surprise being 19.73%.

Factors to Note

Robust uptake of new Desktop App amid coronavirus crisis-induced evolving workspace demand for seamless enterprise communication tools is expected to get reflected in Dropbox’ second-quarter top line.

The company offers a platform that enables users to access, store, synchronize and share files, photos, videos, songs and spreadsheets. Solid demand for cloud storage, triggered by coronavirus crisis led work-from-home wave might have led to incremental adoption in the second quarter.

Increasing popularity of the Dropbox platform instills confidence in the stock. Notably, shares of the company have returned 27.1% in the year-to-date period compared with the industry’s rally of 16.4%.

Also, the company’s efforts to enable users utilize applications through multiple devices has been enhancing experience. Further, integration with leading applications like Zoom Video ZM, Slack and Microsoft Teams are expected to have expanded the Dropbox paying-user base.

Moreover, strong strategic focus on product innovation and introduction of new features like Dropbox Passwords, Dropbox Spaces, and integration of HelloSign eSignature are anticipated to have boosted retention among existing users. This, in turn, might have contributed to the company’s second-quarter performance.

However, increasing investments in product enhancements amid stiff competition from services like Microsoft One Drive, Google Drive and Citrix ShareFile are likely to have impeded margin expansion in the second quarter.

What Our Model Says

Our proven model doesn’t conclusively predict an earnings beat for Dropbox this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Although Dropbox sports a Zacks Rank #1, an Earnings ESP of 0.00% makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat this quarter:

Cogent Communications Holdings CCOI has an Earnings ESP of +11.66% and a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Synaptics SYNA has an Earnings ESP of +10.6 % and a Zacks Rank of 2.

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