The financial outlook of Dropbox (NASDAQ: DBX) looks pretty respectable but many investors are still skeptical of the file hosting service company – mainly because of tough competition from services such as Google's Drive and Microsoft's One Drive. Despite impressive financial results and analysts upgrades, the stock is trading at a 20% discount from pre-earnings because their CFO has announced his departure from the company, according to a Reddit user.
Dropbox posted strong Q2 financial results. But, the stock is down more than 12% since the start of this month as the market seems to be weighing heavily on the CFO departure. The company reported impressive Q2 numbers, beating analyst expectations for both sales and EPS estimates. The 16%-revenue growth is driven by the company’s new desktop app that, according to the company, has been adopted by 90% of its business customers. But, for investors, the departure of CFO Ajay Vashee is a major concern. Vashee will leave the company in September and he will be replaced by Tim Regan, who has been working as chief accounting officer for the past three years.
I am a big fan of Dropbox (NASDAQ: DBX) so while finding stories and reports about the company’s financial outlook and stock, I come across this Reddit post featuring pre-earnings and post-earning discussion about the company's stock. According to the post by wallstreetdoge:
Despite the upgrades, the market seems to be weighing heavily on the CFO departure, which is quite surprising considering how discounted the stock is already.
From the Reddit post, I have picked the following important points:
- They topped both sales and EPS estimates - revenues are up 16% YoY and earnings beat on 0.22c vs 0.17c, which is their most profitable quarter ever.
- Paying users are up 1.4 million YoY sitting at a total of 15mill, with average revenue per user increasing from ~$120 to $126 from the same period last year.
- 90% of their users have adopted on using their new desktop app
- Trial sign-ups for both the individual and business plan continues to be elevated at 20% higher volume than pre-COVID levels
- They won several big educational deals (University of Michigan, North Western, University of Pennsylvania, and Arizona State) over the quarter. Impressively, the University of Michigan deal is extended to all students, faculty, and staff.
- They won a 7-figure deal with a European luxury retailer giving access to all 20,000+ of their staff
- Guidance is lifted upwards to $1.9B rev for the remainder of the year.
The company’s stock, at the current stock price of ~$19.70, is sitting at the most discounted value it's ever been, according to wallstreetdoge. Here are a couple of his comments:
Dropbox had a 5.5x revenue multiple valuation compared to the average software revenue multiple of 30x. In comparison to WFH stocks, Zoom has a revenue multiple of 85x, while Shopify has a revenue multiple of 59x. Well, after Q2 earnings, they now have TTM revenues of $1.797B revenues, and with the current market cap of $8.13B, they are now valued at a 4.5x revenue multiple.
While reading the other users' comments about Dropbox (NASDAQ:DBX) it looks like people have two different opinion about the company.
One group believes that Dropbox is a different and strong player and can and even beat its competitors. For example, one user has the following opinion about the company:
Yeah I love Dropbox. I find Google drive to be dreadful and the whole world doesn't own fucking iPhones. I view Dropbox as a long term competitor to Amazon S3 with a friendly UI for non technical users.
Another user wrote:
Drive is OK for consumers but that is not where the money is. Unless you are talking about education, drive lacks adoption in many of the critical markets. Microsoft and Amazon are dominating the enterprises simply because they bundle their services. Apple has a walled garden of integrated subscription service that can meet some very strict requirements.
On the other hand, the other group sees Dropbox not a better company than Drive and One Drive. They cite Steve Jobs who said that Dropbox is not a company but a a feature. Here is one of the interesting comments:
-Really though what business is using Dropbox? At mine we are pretty much moving our apps to the cloud , why would a company want to leverage drop box instead of just using the cloud providers storage ? Future looks bleak for Dropbox in my opinion. -Like Steve Jobs said: Dropbox is not a product. It's a feature. -The real question is: how do their growth and new clients compare to box and drive
Dropbox (NASDAQ:DBX) isn't among the 30 most popular stocks among hedge funds we track, our data shows. DBX was in 44 hedge funds’ portfolios at the end of the first quarter of 2020, including Bruce Emery's Greenvale Capital, Jim Simons' Renaissance Technologies, and Gil Simon's SoMa Equity Partners.
Disclosure: None. This article is originally published at Insider Monkey.