Businesses that sell their software as subscriptions have more predictable finances and are less subject to short term headwinds. One of Dropbox's strengths is its consistent recurring revenue. This simplicity also applies to the business's finances. These upgrades drive higher revenues per user over time.Ĭreated by author using data from 10-Q and 10-K filings The business then offers auxiliary services for different use cases, such as backups, small businesses, and large enterprises. It's a solid content cloud service that generates its income from monthly paying subscribers. Simplicity and Consistencyĭropbox's simplicity is its strength. Regardless of these issues, I still feel the company is undervalued. I feel this may result in an overly optimistic view of the business. I found that Dropbox relies on adjusted, non-GAAP metrics that exclude some key expenses. The company's share price has only started to meaningfully increase since it began to buy back its shares in 2020.īefore I can invest in a stock like this, I need to understand why returns have been so mediocre over the past few years. Yet even with its solid financial performance the stock has had negative returns since its IPO. The company is a growing software business trading at a cheap valuation. Funky-data/iStock Unreleased via Getty Images Investment ThesisĪt first glance, Dropbox ( NASDAQ: DBX) seems like a great investment.
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