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Dropbox Inc Class A DBX

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Morningstar’s Analysis

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Dropbox Drops Another Strong Quarter; Further Strength Expected; FVE Up to $26

Brian Colello, CPA Sector Director

Analyst Note

| Brian Colello, CPA |

No-moat Dropbox finished off the second quarter of fiscal 2021 with top and bottom lines exceeding our expectations along with management's prior expectations. Management also provided strong guidance for the second half of the year, with the firm expecting solid revenue growth and material improvement in the business' margin profile. Overall, Dropbox is transitioning from the commoditized cloud storage space into greener pastures in the more holistic content collaboration platform space. With the firm's recent acquisitions of DocSend and HelloSign, along with its existing feature-rich platform, we see material average revenue per user, or ARPU, and paid user expansion as attainable. As a result, we are raising our fair value estimate to $26 per share from $19 per share. With shares currently trading above $31 per share, however, we do not see a favorable risk-reward trade-off at current valuations.

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Company Profile

Business Description

Dropbox is a leading provider of cloud-storage and content collaboration tools with an emphasis on individuals and SMB. The company was founded in 2007 and was a pioneer in cloud storage and cross-platform file syncing. Utilizing inorganic and organic means, the firm has been working on diversifying its product mix and pivoting away from the cloud-storage space.

Contact
1800 Owens Street
San Francisco, CA, 94158
T +1 415 857-6800
Sector Technology
Industry Software - Infrastructure
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Speculative Growth
Employees 2,760

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