Goldman Sachs analyst Kash Rangan reiterated a Sell rating on Dropbox (DBX – Research Report) yesterday and set a price target of $22.00.
Kash Rangan has given his Sell rating due to a combination of factors impacting Dropbox’s financial outlook. Despite a slight outperformance in the first quarter of 2024, Rangan notes that Dropbox’s sequential growth in paying users remains significantly below historical averages. Moreover, the modest quarter-over-quarter increase in average revenue per user (ARPU) does not mitigate concerns, particularly given the broader macroeconomic challenges and the company’s reliance on the small and medium-sized business (SMB) sector, which is currently under pressure.
Additionally, while Rangan acknowledges Dropbox’s strategic initiatives, such as the development of Dash, a universal search tool powered by generative AI, he believes that significant investment is still needed for widespread adoption and revenue impact. The cautious stance also takes into consideration the limited scope for ARPU growth due to market pricing sensitivities and the effects of previous price hikes. The uncertainty surrounding the timing and impact of new offerings like Dash further adds to the rationale behind the Sell rating, suggesting that the potential for revenue reacceleration is not sufficient to alter the bearish perspective.
DBX’s price has also changed moderately for the past six months – from $26.250 to $23.140, which is a -11.85% drop .
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Dropbox (DBX) Company Description:
Dropbox, Inc. is a collaboration platform that’s transforming the way people and teams work together. It offers following products: Dropbox Basic, Plus, Professional and Business. The Dropbox Basic is the simple, powerful home for photos, videos, docs, and other files. Its users also get access to new product Dropbox Paper, a collaborative workspace that helps teams create and share early ideas, and work with any type of content, in one centralized place. The Dropbox Plus provides unrivalled sync along with 1 TB of space, powerful sharing features, and increased control. The Dropbox Professional allows independent workers to store, share, and track their work from one place. The Dropbox Business is designed for small to enterprise level businesses, which users get full visibility and control over how critical work files are accessed and shared while letting team members continue to use the products. Dropbox was founded by Andrew W. Houston and Arash Ferdowsi in June 2007 and is headquartered in San Francisco, CA.
