Market Overview

JPMorgan: 4 Positives At Dropbox Investors Are Overlooking

JPMorgan: 4 Positives At Dropbox Investors Are Overlooking
Bulls & Bears Of The Week: GE, Netflix, Nike, Twitter And More
10 Youngest Billionaires On The Forbes 400 List

JPMorgan added Dropbox (NASDAQ: DBX) to its Analyst Focus List Wednesday and recapped its September meetings with the cloud storage company's management.

The Analyst

Analyst Mark Murphy reiterated an Overweight on Dropbox with a $35 price target. 

The Thesis

Murphy isn’t convinced that the growth sell-off is over, but the analyst said Dropbox has improving risk-reward and the potential for 30-50-percent outperformance. (See his track record here.) 

“We believe investors are underestimating the stability and consistency of the Dropbox engine and overlooking the launch and adoption of its premium plans,” the analyst said. 

The following factors are overlooked, Murphy said: 

  • The aforementioned premium plans. 
  • Dropbox Paper and Showcase's roles as important new product drivers with increasing adoption rates.
  • New average revenue per user levels and potential.
  • An attractive growth-adjusted valuation.

“DBX shares have sold off to sub-$23. This has brought shares to a level of 5.6x EV/2019 revenue and 25x EV/2019 adjusted FCF, giving DBX among the lowest, if not the lowest, valuation for a [greater than] $1-billion recurring software revenue stream growing [at greater than] 20 percent,” the analyst said. 

Dropbox reported approximately 400,000 additional paying users in the second quarter and left some investors disappointed in comparison to the last-12-month average of around 550,000, he said. Investors are missing positive trends like healthy top-line guidance and upward margin inflection, Murphy said. 

“At this point, we believe investors are leaning the wrong way if they expect paying user adds to continue to drop, as oscillations in the ebb and flow of ARPU vs. paying user adds seem quite likely."

Price Action

Dropbox shares were down 0.35 percent at $22.67 at the time of publication Wednesday.

Related Links:

Dropbox Isn't Out Of The Woods Just Yet, Nomura Says In Upgrade 

The Upwork IPO: What You Need To Know 

Photo courtesy of Dropbox. 

Latest Ratings for DBX

Oct 2018NomuraUpgradesReduceNeutral
Aug 2018Canaccord GenuityMaintainsBuyBuy
Aug 2018RBC CapitalUpgradesSector PerformOutperform

View More Analyst Ratings for DBX
View the Latest Analyst Ratings

Posted-In: Dropbox JPMorgan Mark MurphyAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga


Related Articles (DBX)

View Comments and Join the Discussion!
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Mid-Day Market Update: Crude Oil Down Over 2%; Esterline Technologies Shares Spike Higher

Mellanox Is 'Underappreciated,' BofA Says In Bullish Initiation