Dropbox Trades Higher Following Encouraging Q3 Earnings Print

Dropbox Inc DBX reported Thursday a top-and-bottom-line beat in its third-quarter release.

Speaking to CNBC, Dropbox CEO Drew Houston said the company can continue thriving as there is no shortage of people or companies with content that require a collaborative effort.

The Analysts

• JMP Securities' Patrick Walravens maintains a Market Outperform rating on Dropbox with an unchanged $37 price target.
• KeyBanc Capital Markets' Rob Owens maintains at Overweight, unchanged $40 price target.
• Bank of America's Justin Post maintains at Neutral, price target lowered from $33 to $31.

Shares of Dropbox were trading higher by 5.7 percent to $26.17.

JMP: Beat On 2 Key Metrics

Dropbox handily beat in two other key metrics, Walravens said in a note. The two metrics include 1) average revenue per user of $116.7, which rose 5.8 percent from a year ago and beat the consensus estimate of $114 and 2) net new paying users of 445,000 came in ahead of the consensus estimate of 244,000.

Walravens said these metrics suggests Dropbox is excelling in converting nonpaying users to paying users.

Related Link: Should Investors Buy The Dip In Dropbox? 4 Analysts Weigh In

KeyBanc: ARPU In Focus

Drobopx now boasts 12.3 million users and the company continues to add new paying users through self-serve channels, Owens said in a note. ARPU "increased meaningfully" mostly through new-user adoption of premium products while the sales team also completed a renewal process for two-thirds of business teams that were grandfathered at legacy prices.

Bank Of America: Near-Term Concerns

The key question for the stock is if the Street views the company's "somewhat tepid" fourth-quarter margin outlook as conservative or not, Post said in a note. Net adds in the third quarter slowed on a year-over-year basis, now expected to come in at 1.6 million net adds for 2018 versus 2.2 million last year.

The analyst's price target revision reflects higher relative capital lease expenses, which isn't included in free cash flow.