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Dropbox (DBX) Set to Buyout DocSend in an All-Cash Deal

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Zacks Equity Research
·3 min read
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Dropbox DBX recently announced its intention to acquire DocSend in all cash deal worth $165 million. Following the announcement, shares of Dropbox were up 4.1% on Mar 9 and closed at $24.74.

Headquartered in San Francisco, DocSend offers services to businesses that help them securely share critical documents and obtain feedback in real time.The company boasts a strong customer base of 17,000.

With the buyout, Dropbox is looking to expand its digital solutions’ portfolio to assist enterprises manage important business-related documents amid ongoing remote work trend.

Dropbox, Inc. Price and Consensus

Dropbox, Inc. Price and Consensus
Dropbox, Inc. Price and Consensus

Dropbox, Inc. price-consensus-chart | Dropbox, Inc. Quote

The DocSend acquisition, subject to regulatory and customary conditions, is expected to be concluded by first-quarter 2021. The buyout will not be accretive to Dropbox’s operating results in 2021.

In the past year, Dropbox’s shares have returned 53.1% compared with industry’s rally of 64.6%.

Increasing Demand for Digital Tools Bodes Well

Coronavirus-triggered work from wave has fueled the demand for digital tools to facilitate effective collaboration and document management. The work from home wave is unlikely to dissipate soon as the global vaccine rollout is expected to be a long-drawn affair.

Moreover, worldwide, business enterprises are adopting hybrid work policies, and this is likely to further drive demand for digital collaboration tools. Notably, Dropbox is among those companies that adopted the Virtual First strategy, under which it will utilise both remote work and on-premises way of working.

Dropbox is well-positioned to gain from increasing demand for its work collaboration tools through which users can seamlessly and securely share files, videos, and spreadsheets.

Dropbox’s latest acquisition will complement its earlier acquisition of HelloSign as well as its Dropbox services. HelloSign is an e-signature vendor that was purchased by Dropbox for $230 million in 2019.

In the last reported quarter, HelloSign witnessed a 70% increase in end user signature requests. Dropbox expanded support for 21 languages for HelloSign and expects the product to gain a solid foothold in international markets due to the extensive awareness campaign.

Apart from that, Dropbox’s focus on product innovation and roll out of new features like Dropbox Vault, Dropbox Passwords, Dropbox Backup and Dropbox Spaces is anticipated to boost the number of paying users.

In 2020, Dropbox also launched two add-ons — Data Migration and Creative Tools — to assist users, especially media professionals, with their work.

Further, integration with leading applications like Atlassian TEAM and Zoom Video ZM is expected to boost the uptake of the platform. The company also collaborated with Adobe ADBE to roll out Dropbox Transfer for Adobe Creative Cloud.

Nonetheless, higher investments on product development amid stiff competition from services like Microsoft One Drive, and Google Drive may limit margin expansion for this Zacks Rank #2 (Buy) stock.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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