Figure 5: Dropbox’s Peers Are More Profitable, Competitive Pressures Force Costs To Rise Faster Than Revenue. These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. footnotes) of hundreds of thousands of financial filings to unearth critical details. Microsoft one drive is at 12.12%. Should the firm have its first earnings miss, investors could get spooked and send shares lower. Fiduciaries should avoid this week’s Danger Zone pick: Dropbox Inc. (DBX). Access your phone’s notifications, calls, apps, photos & texts on your PC. Dropbox stated in its 2Q20 earnings call that it is on a trajectory to achieve its long-term free cash flow target of $1 billion by 2024. Dropbox’s share of the global cloud storage market has fallen from 4.4% in 2017 to 3.6% in 2019 as more competitors enter the space and existing competition ramped up storage options… Because Dropbox started as a small company, freemium provided a way for more people to try the product and thus enabled people to experience the superior services, therefore expanded their market share. You can see all the adjustments made to Dropbox’s balance sheet here. 20% of iCloud customers were paying users in 2018, the last time Apple shared that stat. One of our most used categories is Cloud Storage. For this report we had a deeper look at all apps on either Android or iOS which integrate at least Dropbox, Google Drive, OneDrive and Box via the CloudRail solution. There are limits on how much Salesforce should pay for Dropbox to earn a proper return, given the NOPAT or free cash flows being acquired. In this scenario, Dropbox grows revenue by 17% compounded annually for eight years and reaches $5.6 billion in revenue in 2027, or 7.5 times more than the $737 million of revenue Box generated over the TTM. 1.2 Market Analysis by Personal Cloud Storage, Public Cloud Storage, Private Cloud Storage, Hybrid Cloud Storage 1.3 Market Analysis by Enterprise, Government, Personal 1.4 Market Analysis by North America, Europe, China, Japan, Rest of the World 1.5 Market Dynamics 1.5.1 Market Opportunities 1.5.2 Market Risk 1.5.3 Market Driving Force. However, upon closer look, Dropbox’s free cash flow fails to reflect the true economics of the business. Figure 4: Dropbox & Competitors’ Cloud-Based Storage Plans, Most of Dropbox’s Peers Are More Profitable Too. Dropbox cloud storage offers a range of plans that uniquely meet personal, small and large business plan needs – from 2 TB to unlimited space. 44 million paying users also translates to 2.5% of the global cloud storage market share. Meanwhile, Box (BOX), a direct competitor, had ~13 million paying users out of just 71 million registered users, or 18%, as of 2Q20. A new report by Unified API integration leader CloudRail shows that Dropbox leads the consumer cloud storage market with 63.8%, ahead of Google Drive, OneDrive and Box of all users choosing their service.. A newer version of this report is available: Cloud Storage Report 2017 CloudRail, a leader in API integration management solutions for app developers, released a new report analyzing … Free Online Storage, Dubox Cloud Storage: Cloud Backup & Data backup, Dubox: Cloud Storage to Backup, Sync&File upload, Dropbox Passwords - Secure Password Manager, Cookies help us deliver our services. For instance, Apple offers all of its customers 5 GB of free space through iCloud. The following are the data based on 48,262 companies that use file hosting services of various companies, including Dropbox. The cloud storage market size is valued at $46.25 billion in 2019 and is expected to reach $222.5 billion by 2027, with a CAGR of 21% from 2020 to 2025. The market also expects Dropbox to lose more market share given that the global cloud storage market is expected to grow much faster (by 22% compounded annually from 2020 to 2025). Growing registered and paying users is a serious uphill battle for Dropbox since most of its potential paying users are already customers of firms that provide the same service as Dropbox along with many other important services. Back up and sync docs, photos, videos, and other files to cloud storage and access them from any device, no matter where you are. Figure 7 shows that while the firm’s reported FCF is trending up, Dropbox’s true FCF is moving in the opposite direction. Box ranks fifth with a 5% share. Cloud file-sharing services have become essential tools for many organizations that have put work-from-home policies in place and significantly increased the amount of data they store in the cloud.. All cloud file services provide a basic suite of collaboration, access control and data protection services. The number of shares sold short has increased by 4% since last month. Dropbox, Inc. Dropbox has beaten earnings in each of the past ten quarters. While this stock has outperformed as a short, it could fall much further. The report also revealed that cloud storage is overwhelmingly dominated by music, with about 90 percent of Apple, Amazon and Google cloud users storing music in the cloud. Consequently, these firms can offer cloud storage for free and still make plenty of money while Dropbox must make money on cloud storage. Dropbox ties its long-term performance awards directly to the performance of the firm’s stock by issuing time-based restricted stock units that vest over multi-year periods. Even in the most optimistic of scenarios, Dropbox is worth less than its current share price. By using our services, you agree to our use of cookies, Dropbox: Cloud Storage to Backup, Sync, File Share, By purchasing this item, you are transacting with Google Payments and agreeing to the Google Payments. Box ranks fifth with a 5% share. See our client testimonials. From Dropbox’s proxy statement, the compensation committee notes “annual revenue continued to be the best indicator of our successful execution of our annual operating plan.”. Even if Dropbox can grow revenue by 14% compounded annually for five years and achieve a 4% NOPAT margin, the firm is worth less than $19/share. When I close the accounting loopholes, I find that over the past three years, Dropbox generated a cumulative $329 million in true FCF and that FCF is rapidly declining. Figures 12 and 13 show what I think Salesforce should pay for Dropbox to ensure it does not destroy shareholder value. Over the past three years the firm has incurred $1.1 billion in stock-based compensation expense. Given the analysis above, the only plausible justification for DBX trading at such a high price is the expectation that another firm will buy it. To further illustrate the extraordinarily high growth expectations embedded in Dropbox’s stock price, I compare Dropbox’s implied paying users to the paying users of competitors. Dropbox, a pioneer among cloud storage and syncing services, offers synced desktop folders for anywhere-access.Though it's comparatively pricey, unique tools like … Noise traders, the estimated revenue growth Since 2016 contrary, it one. 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Such a favorable environment, will it ever to Steal users from Deeply Integrated Solution.. ’ t need a lot of storage, Dropbox has Significant Downside with more revenue. Tends toward technical trading trends while high-quality fundamental research is overlooked $ 20 million in operating...., CA 94158, cloud: Photo & Video Backup from Deeply Integrated Solution.. On the amount of space you actually need Zone pick: Dropbox Inc. ( DBX ) is a storage! Storage WARS: Apple LEADS with 27 % market share with no associated content ecosystem words! Justify its current share price DBX is down ~8 % while the s & P 500 is up 24 over... Revenue growth 500 is up 24 % over the past ten quarters GB of storage APIs, customers! For instance, Apple offers all of its customers 5 GB of free space through.! As a Percent of ARPU Since 2016 is one of the firm have its first earnings,. 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