We feel now is a pretty good time to analyse Dropbox, Inc.'s (NASDAQ:DBX) business as it appears the company may be on the cusp of a considerable accomplishment. Dropbox, Inc. provides a collaboration platform worldwide. With the latest financial year loss of US$256m and a trailing-twelve-month loss of US$135m, the US$9.5b market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is Dropbox's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.
According to the 9 industry analysts covering Dropbox, the consensus is that breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of US$304m in 2022. Therefore, the company is expected to breakeven roughly 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 21%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
We're not going to go through company-specific developments for Dropbox given that this is a high-level summary, however, take into account that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one issue worth mentioning. Dropbox currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. Oftentimes, losses exist only on paper but other times, it can be a red flag.
This article is not intended to be a comprehensive analysis on Dropbox, so if you are interested in understanding the company at a deeper level, take a look at Dropbox's company page on Simply Wall St. We've also compiled a list of relevant factors you should further research:
Valuation: What is Dropbox worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Dropbox is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Dropbox’s board and the CEO’s background.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.