Dropbox Share Price Forecast November 2021 – Time to Buy DBX?
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Shares of Dropbox( NASDAQ: DBX) are in the red today, closing at $25.03 as of November 19th (19:35 EST). Dropbox shares have been a shareholder’s disappointment ever since going public in 2018. While the S&P 500 index is up almost 74% since Dropbox’s IPO, the shares are down 10%. The shares took additional damage after decreasing 15% this month after the company reported its Q3 results on November 4th.
Dropbox – Technical Analysis
According to Dropbox’s financial statement, the market cap of $9.832 billion with total assets worth $3.339 billion. Revenue for 2020 was at $1.91 billion with a profit margin of -13.39% compared to $1.66 billion in 2019.
Moving averages such as Exponential Moving Average (10)(26.70), Simple Moving Average (10)(26.72), Exponential Moving Average (20)(27.75), Simple Moving Average (20)(28.47) and Exponential Moving Average (30)(28.3) are indicating a sell action. Oscillators such as Relative Strength Index (14)(26.39), Stochastic %K (14, 3, 3)(4.05), Commodity Channel Index (20)(−125.85), Average Directional Index (14)(33.29) and Awesome Oscillator(−2.90) are neutral.
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Recent Developments
Returns for shareholders have been lackluster in spite of the business doing quite well right now, providing a buying opportunity for long-term investors. The company grew its revenue and user base in Q3 with total revenue at $550.2 million in the period, which is up 12.9% year over year. Annual revenue grew by 12% year over year to reach $2.2 billion. APR is a great measure for Dropbox’s top-line health as it’s mainly a subscription business where customers sign annual or monthly plans. Most of the growth came from paying users which increased from 15.3 million a year ago to 16.5 million today, and growth in average revenue per user (ARPU) from $128.0 to $133.8.
Revenue for Dropbox has consistently increased its revenue per share since 2019, when the company revamped its product organization and expanded from just file storage. As it tries to convert the 500 million+ users of free Dropbox tools into paying subscribers, this trend is likely to continue. The company is expected to generate $715 million in free cash flow, compared to the $491 million it brought in last year. The company has also drastically reduced its share count from 420 million two years ago down to 382 million today. This increases shareholders’ percentage-based ownership of Dropbox and the free cash flow its business generates per share they own.
Should You Buy DBX Shares?
Management still thinks that the company can add plenty of products to the core workflow and file sharing platform, including recent product, launches like a video collaboration tool called Replay, a visual communication tool called Capture, and a shopping feature called Shop. While these additions aren’t game-changers, they will hopefully add to the value proposition of a Dropbox subscription. This is evidenced in the ARPU and a reduction in churn, which management said occurred in Q3. Also the company recently acquired Command E, a desktop search tool that could be a nice integration into the Dropbox platform.
It is surprising to see Dropbox’s market cap sitting at only $9.6 billion in spite of having durable growth, strong profitability, and more and more products coming out. It would achieve a price-to-free cash flow (P/FCF) of 13.4 if the company can hit its $715 million free cash flow target for this year. This means that Dropbox investors are getting approximately 7.5% in cash per year (called free cash flow yield) by buying shares of Dropbox right now. As the free cash flow number increases over the next few years, Dropbox shares will also follow suit. Considering this now is a great time to pick up DBX shares.
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