However, the much bigger question that remains is how long it will offer cloud users enough incentive to choose them over Google Drive, One Drive, or the other multiple choices users of cloud services enjoy. An earnings beat here should set the trend and may give DBX stock a lift for a time. Wall Street predicts DBX will report earnings of 4 cents per share. The no-moat status of Dropbox stock makes an earnings beat critical in its first earnings report. What they can count on is Dropbox’s lack of a moat limiting the company’s options over the long run. Investors cannot count on such a scenario playing out. Perhaps a company will overpay for DBX much like Time Warner Inc (NYSE: TWX) paid too high of a premium in its failed union with AOL. Like AOL, I think Dropbox will eventually become a subsidiary of a much larger player - if it exists at all. However, over time, AOL lost customers as its dependence on dial-up technology left the company with no competitive alternatives to large telcos that offered faster service. At one time AOL was a no-moat internet service provider (ISP) that grew by becoming the first major ISP and gaining name recognition. AOL today exists as an obscure subsidiary of Verizon Communications Inc. The competitive position of DBX indicates it has become the AOL of the cloud storage business. Third, because of competition, the time to build up its valuation remains limited. Dropbox also wins praise for the platform’s ability to sync files better than Google Drive or Microsoft’s One Drive. In fact, Dropbox dominated this business until Google Drive and other services began chipping away at its market share. Dropbox credits much of its advantage to its first-mover status in the industry. But what happens when growth slows? Will an $11.8 billion company such as Dropbox compete with three tech behemoths who are each within striking distance of a $1 trillion market cap?įor now, Dropbox and Alphabet’s Google Drive hold the largest market shares in the business. The high growth in this industry leaves room for all of these players - for now. (NASDAQ: AMZN), and Alphabet Inc (NASDAQ: GOOGL, NASDAQ: GOOG). While it attracts small players such as Box Inc (NYSE: BOX), it also draws the likes of Microsoft Corporation (NASDAQ: MSFT),, Inc. It also sees many companies competing for business in storage. The cloud storage industry currently enjoys rapid growth. Second, DBX faces formidable competition. The average PEG ratio for the S&P 500 stands at about 1.33. However, even if it sustains that level of growth, that takes the price-to-earnings-to-growth (PEG) ratio to almost 2.9. Analysts project 19 cents per share in net income for this year and 30 cents per share for 2019. The forward price-to-earnings (PE) ratio stands at about 166. The stock looks to have grown far ahead of valuations. However, almost two months after that initial surge, the stock trades at just over $30 per share. Dropbox stock surged by 35% on its first day of trading. The company set an IPO price of $21 per share. Valuations for Dropbox Stock Remain Highįirst, the price and valuation of Dropbox stock limits its potential growth. Still, I think given the position of Dropbox stock, it needs to beat estimates here for many reasons. With no earnings history, predicting whether the company will beat earnings becomes more difficult. This will serve as the company’s first earnings report since launching its IPO on March 23. The earnings announcement will come Thursday after the market closes. However, its lack of a moat and the threat of much larger competitors leave few opportunities for investors in Dropbox stock to profit.Īnalysts expect Dropbox earnings of 4 cents per share on revenues of $309.26 million. Reporting a higher earnings number should add value to the company for a time. This announcement, which will come Thursday after the bell, will likely serve as a trendsetter for the company. (NASDAQ: DBX) will report earnings for the first time as a public company.
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