Why This Analyst Is Modeling For 30% Upside In Dropbox
Dropbox, Inc. (NASDAQ: DBX)’s broad appeal, compelling conversion opportunity and high margins give the stock compelling upside, according to KeyBanc Capital Markets.
The Analyst
Rob Owens of KeyBanc Capital Markets initiated coverage on Dropbox with an Overweight rating and $40 price target, implying 30-percent projected upside.
The Thesis
Dropbox has achieved a $1-billion revenue run rate in only two fiscal years, faster than any SaaS company, Owens said in a Tuesday note. The company’s growth trajectory is largely made possible by the broad appeal of the company’s “highly intuitive” platform, he said.
“The company sees a $50-billion opportunity to address increasingly disparate content silos, fragmented legacy productivity tools and the rise of mobile workforces."
Among its base of 500 million free users, Dropbox has identified more than 300 million "high-value" targets that present a promising conversion opportunity, the analyst said.
Dropbox’s gross margin expanded from 33 percent in 2015 to 71 percent in 2017, made possible by company-owned infrastructure that stores over 90 percent of its user content, Owens said.
“Given that Dropbox's infrastructure stores the vast majority of user data, the company's contribution margin exceeds that of software companies using third-party cloud vendors.”
Price Action
At the time of publication, shares of Dropbox were trading up 0.21 percent at $29.08.
Related Links:
Dropbox IPO: Everything You Need To Know
How Airbnb And Dropbox Brought Fintech To Their Company Kitchens
Photo courtesy of Dropbox.
Latest Ratings for DBX
Apr 2018 | JP Morgan | Initiates Coverage On | Overweight | |
Apr 2018 | Macquarie | Initiates Coverage On | Outperform | |
Apr 2018 | Bank of America | Initiates Coverage On | Neutral |
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