Analyst Note| Brian Colello, CPA |
No-moat Dropbox reported strong second quarter results, as revenue exceeded our expectations and adjusted earnings per share surpassed CapIQ consensus estimates. Like other tech companies offering cloud storage and online collaboration tools, Dropbox has seen an increase in usage as work from home continues to be commonplace. However, we still believe that in an increasingly commodified market of cloud storage and work collaboration tools, Dropbox cannot compete with its well-capitalized competitors such as Microsoft and Google. As a result, we are maintaining our fair value estimate of $15 per share. Shares fell 5% after hours, yet we continue to view them as overvalued and would recommend waiting for a larger pullback before committing capital to the name.