Analyst: The Dropbox Post-Earnings Dip Should Be Bought 'Aggressively'

The 4-percent decline in Dropbox Inc. DBX's stock in reaction to its first-quarter earnings report is somewhat puzzling as the company delivered upside on "essentially every financial metric," according to Canaccord Genuity.

The Analyst

Canaccord Genuity's Richard Davis maintains a Buy rating on Dropbox with a price target lifted from $35 to $36.

The Thesis

Dropbox's first-quarter earnings showed not only "admirable progress" in adding customers but also in terms of product innovation, Davis said in a research note. More important to the bullish case is the company's path of becoming a platform leader for team content management "did not falter."

Other notable bullish items from the report include upside in revenue, operating income, free cash flow, deferred revenue, customer additions and average revenue per user, new partnership announcements expands its already strong ecosystem, and a glimpse into new products like 1 Dropbox Paper where user conversion is strong.

There were also a few bearish items to monitor, including fluctuations in ARPU quarter to quarter and some accounting changes "around useful life estimates for some data center hardware, which does not directly flow through to cash flow."

Price Action

At time of publication, shares of Dropbox were trading lower by more than 2.6 percent at $31.09.

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