Ahead of Dropbox Inc. (NASDAQ:DBX)'s IPO, D.A. Davidson initiated coverage of the company with a Buy rating and $22 price target.
The stock listed on the Nasdaq March 23 and recorded a 35.6-percent gain on its debut. The stock is up 43 percent through Friday since its listing.
The Analyst
D.A. Davidson analyst Rishi Jaluria maintained a Buy rating on Dropbox and raised the price target from $22 to $36.
The Thesis
An investment in Dropbox now is less risky than buying shares before the company went public, Jaluria said in a Monday note.
D.A. Davidson raised its 2019 estimates for Dropbox, and Jaluria said even more upside could be realized than what's reflected in the sell-side firm's estimates. The firm expects Dropbox to notch 16-percent customer growth and 0.7-percent ARPU growth over the next two years.
"While we acknowledge there may be further volatility in Dropbox's share price in the near term, especially as [the] lock-up period expirations approach, we believe shares should outperform over the next 12-18 months."
Dropbox is unlikely to invest in an enterprise sales force, as its focus is on teams rather than massive enterprise-wide deployments, Jaluria said.
What differentiates Dropbox from Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL)'s Google Drive and Microsoft Corporation (NASDAQ:MSFT)'s OneDrive is that Dropbox aims to serve as "a neutral third-party that can operate well with products from Microsoft, Google, Adobe Systems Incorporated (NASDAQ:ADBE), Slack and others," the analyst said.
The Price Action
Dropbox shares were down 3.8 percent at the time of publication Monday.
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Photo courtesy of Dropbox.
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