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How High Can Dropbox Fly?

Dropbox popped after The Information named them as a possible acquisition target. Even if it's not true, the recent rally still might have room to run.

Caleb Dismuke

Dropbox ($DBX) has quietly put in a stellar year for both its stock performance and business operations. Its stock is up 30% YTD compared to gains of 13% for the S&P 500 and 6% for its closest competitor, Box ($BOX).


What's its Chart Telling us?

Dropbox ($DBX) chart
  • Since September 2018, Dropbox has traded a $16-$26 range. Now, price is bumping up against the $24-$26 resistance level.
  • If price fails to eclipse $26, we could see a move towards the lower end of the range near $17.50.
  • I'm looking for a move above the $24-$26 resistance level and a retest of the post-IPO high at $43.50. That's a 67% upside move from $26.

Q3 2020 highlights

Q3 2020 Q3 2019 YoY change (%)
Revenue $487.4M $428.2M 14%
ARR $1.9B $1.7B 12%
Paying users 15.25M 14M 9%
ARPU $128.03 $123.15 4%
GAAP gross margin 78.8% 75.5% N/A
GAAP operating margin 6.2% (4.3)% N/A
GAAP net income $32.7M ($17.0)M N/A
Free cash flow $187.0M $102.5M 82%
  • ARR = annual recurring revenue
  • ARPU = Average revenue per paying user

Paying users and ARPU (bolded) are key metrics Dropbox uses to measure the health of its business.

Valuation multiples

COMPANY Price/Sales (NTM)
Dropbox ($DBX) 4.5x
Box ($BOX) 3.4x
Atlassian ($TEAM) 29.8x
Zoom ($ZM) 33.6x

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