Canaccord: Pullback In Dropbox After Q2 Print 'A Gift'

Dropbox Inc DBX apparently disappointed the Street with its second quarterly report as a public company Thursday. 

The Analyst

Canaccord Genuity analyst Richard Davis maintained a Buy rating on the shares of Dropbox and lifted the price target from $36 to $38.

The Thesis

Dropbox reported upside across the board, with 27-percent year-over-year growth, operating margins of 14.1 percent and an adjusted free cash flow margin of 25.1 percent on the product front, Davis said in a Friday note. (See the analyst's track record here.) 

Average revenue per user rose 5 percent year-over-year, as the company released several new features during the quarter to improve the mobile app, Paper, Showcase and admin tools, the analyst said.

Davis said he sees no logic in the stock's 10-percent after hours drop, as the company delivered "everything we had hoped for," with a "nice" free cash flow number. 

The retirement of COO Dennis Woodside could impact the stock, Davis said, although he termed any move on the news as an overreaction.

"Our bullish opinion on Dropbox is unchanged and while our ego would have liked a 15-percent [after hours] pop that obliterated the naysayers who we believe swarmed into the stock into the print, a more reasoned assessment is that this pullback is a gift for our key customers who buy stocks based on fundamentals and are happy to buy things on sale — which is what we believe describes DBX." 

The Price Action

Dropbox shares have gained about 21 percent since their March 23 listing. The stock was falling 7.19 percent to $31.96 after the open Friday. 

Related Links:

Benzinga's Top Upgrades, Downgrades For August 10, 2018

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

Photo courtesy of Dropbox.