Dropbox (DBX) AI Stock Analysis

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Dropbox

(NASDAQ:DBX)

Rating:75Outperform

Price Target:

$33.00

▲(11.98%Upside)

Dropbox shows solid financial performance with strong revenue growth and cash generation. Despite high leverage and negative equity posing risks, technical indicators suggest positive momentum. Valuation appears reasonable, and strategic initiatives discussed in the earnings call are promising, although challenges remain in revenue growth and market competition.

Positive Factors

Financial Performance

Dropbox achieved a record high operating margin of 41.7%, surpassing the previous quarter's margin and analyst estimates.

Investor Appeal

Dropbox's stock may attract value investors due to its modest valuation, robust stock repurchase program, and substantial cost reduction efforts.

Negative Factors

Growth Projections

Dropbox’s revenue growth is projected to turn negative for the first time in its history, marking the weakest performance ever.

Revenue Growth

Dropbox continues to face challenges with revenue growth and fierce competition.

User Metrics

There was another decline in paying users, with the average revenue per user slightly decreasing compared to previous quarters.

Dropbox (DBX) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$8.30B

Dividend YieldN/A

Average Volume (3M)3.38M

Price to Earnings (P/E)19.4

Beta (1Y)0.79

Revenue Growth0.79%

EPS Growth0.59%

CountryUS

Employees2,204

SectorTechnology

Sector Strength83

IndustrySoftware - Infrastructure

Share Statistics

EPS (TTM)0.70

Shares Outstanding204,571,030

10 Day Avg. Volume2,836,392

30 Day Avg. Volume3,376,674

Financial Highlights & Ratios

PEG Ratio-0.98

Price to Book (P/B)-10.64

Price to Sales (P/S)0.00

P/FCF Ratio9.20

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$31.75

Price Target Upside7.74% Upside

Rating ConsensusHold

Number of Analyst Covering6

Dropbox Business Overview & Revenue Model

Company DescriptionDropbox, Inc. provides a content collaboration platform worldwide. Its platform allows individuals, families, teams, and organizations to collaborate and sign up for free through its website or app, as well as upgrade to a paid subscription plan for premium features. As of December 31, 2021, the company had approximately 700 million registered users. It serves customers in professional services, technology, media, education, industrial, consumer and retail, and financial services industries. The company was formerly known as Evenflow, Inc. and changed its name to Dropbox, Inc. in October 2009. Dropbox, Inc. was incorporated in 2007 and is headquartered in San Francisco, California.

How the Company Makes MoneyDropbox generates revenue primarily through a subscription-based model. The company offers a range of paid plans for individuals, teams, and enterprises, which provide users with increased storage capacity, advanced collaboration tools, and enhanced security features. Key revenue streams include Dropbox Plus, Dropbox Professional, and Dropbox Business plans, each tailored to different user needs and organizational sizes. Additionally, Dropbox earns revenue through its HelloSign product, a digital signature and document workflow solution. Strategic partnerships with technology companies and integrations with popular productivity tools further enhance Dropbox's offerings and expand its user base, contributing to its revenue growth.

Dropbox Key Performance Indicators (KPIs)

Any

Annual Recurring Revenue

Annual Recurring Revenue
Measures the predictable revenue Dropbox earns annually from subscriptions, highlighting financial stability and growth potential.

Chart InsightsDropbox's ARR growth has slowed, with recent quarters showing stagnation and slight declines. Despite operational efficiencies and strategic advancements like Dash, challenges with FormSwift and competitive pressures are impacting revenue and user growth. The earnings call highlighted strong operating margins and share repurchases, but also noted a decline in paying users and ARPU. While Dropbox raised its revenue guidance slightly, ongoing headwinds from FormSwift and market competition could continue to pressure ARR growth.

Data provided by:

Main Street Data

Dropbox Earnings Call Summary

Earnings Call Date:May 08, 2025

(Q1-2025)

% Change Since: -0.74%|

Next Earnings Date:Jul 31, 2025

Earnings Call Sentiment Neutral

The earnings call showcased Dropbox's strategic advancements and operational efficiency, particularly with the launch and improvements in Dash. Despite a decline in revenue and paying users, Dropbox demonstrated strong operating margin performance and share repurchase activities. Challenges remain with FormSwift and competitive pressures in the market.

Q1-2025 Updates

Positive Updates

Highest Ever Non-GAAP Operating Margin

Achieved the highest ever non-GAAP operating margin largely due to headcount reduction and lower marketing spend. Operating margin increased by more than 500 basis points from the year ago period.

Successful Dash Launch and Updates

Launched major updates to Dash, enhancing AI capabilities and user experience. Dash now supports multimodal search including text, images, and video, with significant performance improvements.

Increased Desktop Activations

New desktop activations increased by over 50% year-over-year, driven by improved user prompts and streamlined onboarding processes.

Positive Feedback and Adoption for Dash

Received encouraging customer feedback on Dash's new features, particularly in the creative services industry.

ISO and SOC Certifications for Dash

Dash achieved ISO 27001 compliance and SOC 2 certifications, reinforcing commitment to security and compliance.

Strong Share Repurchase Program

Repurchased approximately 18 million shares, spending $500 million, with $870 million remaining under authorization.

Negative Updates

Decline in Revenue and Paying Users

Total revenue for Q1 declined 1% year-over-year to $625 million. Paying users decreased by approximately 60,000 on a sequential basis.

FormSwift Challenges

FormSwift acted as a headwind to revenue and ARR, with expected decline in paying users due to strategic decisions.

Pressure on ARPU

Average Revenue Per Paying User (ARPU) declined sequentially due to FX and a mix shift away from higher-priced FormSwift subscriptions.

Company Guidance

During the Dropbox First Quarter 2025 Earnings Conference Call, the company provided detailed guidance for both the second quarter and the full fiscal year. For Q2 2025, Dropbox expects revenue to range between $616 million and $619 million, with FormSwift projected to be a 150 basis point headwind. Non-GAAP operating margin is anticipated to be around 37.5%, and diluted weighted average shares outstanding are expected to be between 279 million and 284 million shares. For the entire fiscal year, Dropbox raised its revenue guidance by $10 million to a range of $2.475 billion to $2.490 billion, maintaining constant currency revenue guidance at $2.483 to $2.498 billion. They anticipate FormSwift to consistently present a 150 basis point revenue headwind throughout the year, while gross margin outlook remains unchanged. Non-GAAP operating margin guidance has been increased by 50 basis points to a range of 38% to 38.5%, and unlevered free cash flow is now expected to be at or above $950 million. Capital expenditures are projected to be between $25 million and $30 million for the year, with finance lease lines estimated at approximately 6% of revenue. Expected diluted weighted average shares outstanding for the year have been revised downward to 276 to 281 million shares due to share repurchase activities.

Dropbox Financial Statement Overview

Summary

Dropbox exhibits solid financial health with strong revenue growth and cash flow generation. The company maintains high profitability margins, though slightly declining net profits warrant attention. The balance sheet poses risks due to negative equity and high leverage, but substantial cash reserves provide a buffer.

Income Statement

Very Positive

Dropbox shows strong financial performance with consistent revenue growth, evidenced by a 1.86% increase in TTM. The gross profit margin stands at 82.53%, indicating effective cost management. However, the net profit margin slightly decreased to 17.75% in TTM. Despite this, the company maintains solid EBIT and EBITDA margins at 19.08%, showcasing operational efficiency.

Balance Sheet

Neutral

Dropbox's balance sheet reflects a high debt-to-equity ratio due to negative stockholders' equity, indicating financial risk. Despite this, the company has improved its equity position over time. The equity ratio is negative, suggesting liabilities exceed assets, which is a concern. However, the company maintains a substantial cash reserve, offering liquidity.

Cash Flow

Very Positive

Dropbox demonstrates robust cash flow generation with a 14.83% growth in free cash flow. The operating cash flow to net income ratio is strong at 1.98, indicating excellent conversion of income to cash. The free cash flow to net income ratio of 1.93 further underscores efficient cash management.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
2.55B	2.50B	2.32B	2.16B	1.91B
	Gross Profit
2.10B	2.02B	1.88B	1.71B	1.50B
	EBIT
486.20M	383.50M	531.70M	274.40M	519.40M
	EBITDA
486.20M	553.50M	688.80M	463.30M	678.70M
	Net Income Common Stockholders
452.30M	453.60M	553.20M	335.80M	-256.30M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.59B	1.36B	1.34B	1.72B	1.12B
	Total Assets
3.33B	2.98B	3.11B	3.09B	2.39B
	Total Debt
2.03B	2.03B	2.29B	2.37B	1.12B
	Net Debt
705.40M	1.42B	2.06B	1.84B	804.60M
	Total Liabilities
4.08B	3.15B	3.42B	3.39B	2.05B
	Stockholders Equity
-752.40M	-165.80M	-309.40M	-293.90M	333.80M
Cash Flow		Free Cash Flow
871.60M	759.10M	762.40M	700.90M	490.50M
	Operating Cash Flow
894.10M	783.70M	797.30M	729.80M	570.80M
	Investing Cash Flow
443.80M	395.20M	-48.50M	-524.80M	-233.60M
	Financing Cash Flow
-586.60M	-799.20M	-1.04B	16.20M	-577.70M

Dropbox Technical Analysis

Technical Analysis Sentiment

Positive

Last Price29.47

Price Trends

50DMA

28.14

Positive

100DMA

28.63

Positive

200DMA

27.73

Positive

Market Momentum

MACD

0.27

Negative

RSI

59.87

Neutral

STOCH

78.05

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DBX, the sentiment is Positive. The current price of 29.47 is above the 20-day moving average (MA) of 29.06, above the 50-day MA of 28.14, and above the 200-day MA of 27.73, indicating a bullish trend. The MACD of 0.27 indicates Negative momentum. The RSI at 59.87 is Neutral, neither overbought nor oversold. The STOCH value of 78.05 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for DBX.

Dropbox Risk Analysis

Dropbox disclosed 54 risk factors in its most recent earnings report. Dropbox reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 1 New Risks

We have in the past and may continue to experience privacy and data security breaches or incidents. Q4, 2024

Dropbox Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
BOX	76 Outperform	$5.49B	29.01	152.34%	―	4.88%	80.94%
DBX	75 Outperform	$8.30B	19.36	-60.11%	―	0.79%	0.59%
BAND	66 Neutral	$423.53M	―	-0.32%	―	18.51%	97.57%
DOCN	66 Neutral	$2.53B	26.22	-41.63%	―	13.21%	109.61%
AVPT	65 Neutral	$3.85B	―	-8.39%	―	21.70%	-67.95%
Sector *	62 Neutral	$11.80B	10.37	-7.29%	2.91%	7.39%	-7.96%
CFLT	60 Neutral	$8.29B	―	-34.18%	―	24.11%	21.87%

* Technology Sector Average

Performance Comparison

DBX

Dropbox

29.47

8.14

38.16%

BOX

Box

37.41

10.96

41.44%

BAND

Bandwidth

14.95

-4.34

-22.50%

AVPT

AvePoint

19.56

10.46

114.95%

DOCN

DigitalOcean Holdings

28.63

-8.07

-21.99%

CFLT

Confluent

24.36

-1.71

-6.56%

Dropbox Corporate Events

Shareholder Meetings

Dropbox Stockholders Approve Key Proposals at Annual Meeting

Neutral

May 19, 2025

At the 2025 Annual Meeting of Stockholders held on May 15, Dropbox‘s stockholders voted on several key proposals. All nominated directors were elected, Ernst & Young LLP was ratified as auditors, and the compensation of executive officers was approved. Stockholders decided to hold annual advisory votes on executive compensation, while a proposal to impose vesting provisions on Class B common stock did not pass.

The most recent analyst rating on (DBX) stock is a Hold with a $29.00 price target. To see the full list of analyst forecasts on Dropbox stock, see the DBX Stock Forecast page.

Business Operations and StrategyFinancial Disclosures

Dropbox Reports Q1 2025 Financial Results with Revenue Dip

Neutral

May 8, 2025

On May 8, 2025, Dropbox announced its fiscal 2025 first-quarter financial results, reporting a revenue of $624.7 million, which marks a 1.0% decrease from the previous year. Despite the revenue decline, the company improved its GAAP operating margin to 29.4% and non-GAAP operating margin to 41.7%, attributed partly to a reduction in stock-based compensation. The company also highlighted its focus on enhancing the Dash user experience and introduced new features to address customer needs. The macroeconomic environment remains challenging, but Dropbox is committed to refining its execution and increasing operational efficiency to capitalize on opportunities and create shareholder value.

Executive/Board Changes

Dropbox Announces Departure of Chief Customer Officer

Neutral

Apr 11, 2025

On April 11, 2025, Dropbox, Inc. announced that Eric Cox will step down as Chief Customer Officer. He will assist with the transition and remain as a non-executive employee until mid-August.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.