#Dropvox earnings report free#

While the prospects of an acquisition have emerged recently, personally, besides Adobe (ADBE) or Oracle (ORCL), I do not see a feasible acquisition case. The lingering threat of the three big competitors, namely Google (GOOG) (GOOGL), Microsoft (MSFT), and Apple (AAPL) itself, poses an argument against investing in Dropbox since competition poses the single biggest threat in terms of growth and survivability for the company for the next 5-10 years.

While logical and most certainly influencing the mentioned decline in ARPU, I assume that increased competitive pressure also plays a part in this, with more services being bundled and margins decreasing.ĭropbox Overview (Dropbox Investor Presentation) Management mentioned in its Q2 earnings call that higher adoption of the family plan and subsequently lower margins would drive this decline. The reasons for the decline in ARPU are probably manifold. While the amount of new paying users has remained relatively stable over the observed timeframe at around 300 thousand added quarter-over-quarter, average revenue per user (ARPU) has fallen from $134.78 in Q4 2021 to $133.34, which helps explain the recent decline in revenue growth. It is fair to say that my expectations in this regard have been wrong. I expected that growing segments like e-Signature in the form of HelloSign and document analytics with DocSend would smoothen out the expected deceleration in Dropbox's core cloud product. In the past, my main value proposition for the company evolved around the thesis that Dropbox would remain at a growth rate above 10% for at least the next 2-3 years, which at the time to me appeared realistic as revenue had just grown 13.5%.

#Dropvox earnings report free#

When speaking of a value stock in this context, I refer to a stock with low-digit growth prospects but operates profitable, and its intrinsic value based on Free Cash Flow suggests that its share price is undervalued. So, in conclusion, revenue is decelerating, but not as fast as suggested in the first place. Adjusted for these results, revenue growth would have been 8.8%. However, the results were significantly impacted by currency headwinds and lost revenue in Russia. Standalone, these results would offer little positives for Dropbox stock. Free Cash Flow for Q2 came in at $205.9 million, compared to $216.0 million the year before, a decrease of ~$ 10 million YoY. In summary, revenue came in at $572.7 million, an increase of 7.7% YoY compared to 13.5% growth in Q2 2021. Dropbox's Q2 results were a preview of what is to come with both revenue and Free Cash Flow growth decelerating from the previous year. On August 4th, 2022, Dropbox released quarterly results for its second quarter, which ended June 30th. I now expect Dropbox to be fairly valued at $27.12, with an upside of 28.1% in the base case. However, I lower my rating from 'strong buy' to 'buy,' primarily because of weaker-than-expected revenue growth that is well below the industry average.

I remain bullish on the stock mainly due to Dropbox's ability to generate free cash flow and smart value realization on the side of management in the form of share buybacks and M&A. When I first initiated my a rating for Dropbox stock in September 2021, I spoke of a hybrid relationship between growth and value, which is now heavily skewed towards the value aspect of the argument. However, while the advanced profitability is undoubtedly appealing, growth has slowed down significantly and is expected to decelerate even more in H2 2022. The market has been unjustifiable harsh to the stock, now trading at a forward P/E of just 13.8 and ~10x Free Cash Flow.Ĭompetition is the main risk factor, but the last 5 years have shown Dropbox's competitive resilience.ĭropbox (DBX) stock has underperformed the broader tech-market over the last year, which may come as a surprise since Dropbox generates robust free cash flow, which should favor the stock in times of interest hikes and market rotation towards value stocks.

Dropbox H1 2022 results were disappointing with slowing revenue and Free Cash Flow growth, and limited future growth prospects.