Dropbox: Growth At A Reasonable Price Or Value Trap

In the comment section of my last video, a subscriber asked me if I had any opinion on Dropbox (DBX), a young fast-growing tech stock. Although this is a company that I have not researched for investment purposes, it is a company whose product I use in my own business and to a lesser extent in my personal life. Therefore, even though I did not have an investment opinion, I am familiar.

Morningstar provides the following business description:

“Dropbox provides cloud-based file storage, sharing, and project collaboration services for individuals and, to a lesser extent, enterprise customers. The company was founded in 2007 and offers a browser service, toolbars, and apps to upload, share, and sync files to the cloud that can be accessible across a number of devices and by a multitude of users. Dropbox allows users to store and access documents, videos, and photos.”

Although the company faces stiff competition from well-capitalized behemoths such as Microsoft and Google, the company has carved out a niche for itself. Consequently, since its founding in 2007, the company has attracted 600 million users and generated approximately $1.7 billion in revenues. However, as is often the case, the company’s historically high growth rate is showing signs of slowing down. Nevertheless, the company is still expected to grow their free cash flow fast enough for me to consider it reasonably valued at current levels. The real question is – can the company sustain above-average growth long-term? I leave it up to the viewer to decide for themselves. Based on what I show in the video, I believe the company is worthy of further consideration for investors looking for long-term capital appreciation and total return.

FAST Graphs Analyze Out Loud Reviewing Dropbox:

Video length 00:09:44

Disclosure:  No position.

Disclaimer: The opinions in this article are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the ...

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William K. 3 years ago Member's comment

Sometimes it happens that an organization creates a product that exactly meets people's requirements, and sometimes that product does very well. This company, with that product, appears to have got just the right mix at the right price.

Derek Snyder 3 years ago Member's comment

I was a massive fan of #Dropbox in its early days. But the product is so easy to replicate that the market has been flooded with equally good, free alternatives. I just don't see the value of $DBX

William K. 3 years ago Member's comment

I had not considered that aspect. OOPS!!

Donald Kaplan 3 years ago Member's comment

Very interesting, thank you.