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Cloud drive storage to save photos, music, docs, video! Figure 1: Dropbox’s YoY Revenue Growth Since 2016. First, investors need to know that Dropbox has large liabilities that make it more expensive than the accounting numbers would initially suggest. Dropbox makes moving between personal, business, and enterprise-level plans easy by transferring your account to the new plan without changing file configurations.Google Drive for Business plans start at 30GB of storage per user at the Basic level, while Business and Enterprise plans give users unlimited storage with some extra features. This adjustment represented 1% of reported net assets. Should the firm have its first earnings miss, investors could get spooked and send shares lower. Figure 10: Dropbox’s Implied 2027 Average Paying Users vs. 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.”. Top Leading Companies of Global Private Cloud Storage Market are Amazon Cloud Drive, Ubuntu One, Apple iCloud, Dropbox, Google Drive, Box, Microsoft SkyDrive, MediaFire, SpiderOak, Mega and others. Hardware Solution 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. Dropbox, Inc. I first warned about Dropbox prior to its IPO in March 2018, and again in September 2018 and August 2019. With COVID-19-induced disruptions forcing most businesses to adapt their operations to be more remote friendly, Dropbox was in prime position to gain market share. See all adjustments to Dropbox’s valuation here. And with advanced sharing features, it’s easy to share docs and send files—large or small—to family, friends, and co-workers. Over the TTM, the firm’s true FCF is -$40 million compared to reported FCF of $400 million. See our client testimonials. MEGA is Cloud Storage with Powerful Always-On Privacy. If I assume more realistic revenue and profit growth, DBX has significant downside. The stock will also likely sink should any of its competitors get more aggressive and offer more cloud storage at even lower prices so that Dropbox’s value proposition gets only weaker. He was a 5-yr member of FASB's Investors Advisory Committee. Inferior Offering at Higher Cost Limits Growth. Here’s a quick summary for noise traders when analyzing DBX: Executive Compensation Plan Is Not Creating Shareholder Value, In addition to base salaries, Dropbox’s executives earn cash bonuses and long-term equity incentive compensation. Each implied price is based on a ‘goal ROIC’ assuming different levels of revenue growth. The combination of the firm’s slowing growth rate and higher expectations make a future beat more difficult. In other words, executives are incentivized to focus on revenue, with little to no regard to the profitability of the firm. True FCF. $8.82 billion Dropbox's valuation, as of July 2020 The number of shares sold short has increased by 4% since last month. Its share price DBX is down ~8% while the S&P 500 is up 24% over the last year or so. To justify its current price of $19/share, Dropbox must: See the math behind this reverse DCF scenario. I also optimistically assume Dropbox achieves a 4% NOPAT margin, which is above Dropbox’s TTM margin of 2% and Salesforce’s TTM margin of 1%. Dropbox lets anyone upload and transfer files to the cloud, and share them with anyone. With ties to revenue and stock price, it’s not surprising that the firm’s executive compensation plan has not created shareholder value. Figures 12 and 13 show what I think Salesforce should pay for Dropbox to ensure it does not destroy shareholder value. Figure 3 shows some of Dropbox’s direct competitors and their number of users, who have access to a free version of what Dropbox offers. Over the past three years the firm has incurred $1.1 billion in stock-based compensation expense. Dropbox lets anyone upload and transfer files to the cloud, and share them with anyone. The paper empirically shows that my firm’s data is superior to “Operating Income After Depreciation” and “Income Before Special Items” from Compustat, owned by S&P Global (SPGI). For this analysis, I chose Salesforce.com Inc. (CRM) as a potential acquirer of Dropbox since Dropbox already integrates with Salesforce’s cloud-based platform and such vertical integration would give Salesforce greater in-house services and access to Dropbox’s over 600 million registered users. Below are specifics on the adjustments I make based on Robo-Analyst findings in Dropbox’s 10-Qs and 10-K: Income Statement: I made $67 million of adjustments, with a net effect of removing $9 million in non-operating expenses (1% of revenue). Dropbox’s paying users, the primary source of revenue, are growing much more slowly too. Though Dropbox's worth hit $12 billion in the fall of 2018, as of July 26, 2020, Dropbox has a market cap of approximately $8.82 billion. Figure 7: Dropbox’s Reported FCF vs. WebDrive has a share of 13.13% in the market. Dropbox’s return on invested capital (ROIC) only tops Box, and at less than 4%, is well below the peer group’s market-cap-weighted average of 48%. Dropbox cloud storage offers a range of plans that uniquely meet personal, small and large business plan needs – from 2 TB to unlimited space. 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. Access your phone’s notifications, calls, apps, photos & texts on your PC. Each of the above scenarios also assumes Dropbox is able to grow revenue, NOPAT and FCF without increasing working capital or fixed assets. The Appendix details exactly how we stack up. The key variables are the weighted average cost of capital (WACC) and ROIC for assessing different hurdle rates for a deal to create value. Dropbox market share in the Datanyze Universe. In this scenario, Dropbox grows NOPAT from -$43 million in 2019 to $163 million in 2027, and the stock is worth just $7/share – a 63% downside. You can see all the adjustments made to Dropbox’s income statement here. Dropbox has a share of 34.44% in the online file hosting industry. Dropbox has generated negative economic earnings in each of the past four years. Back up and sync docs, photos, videos, and other files to cloud storage and access them from any device, no matter where you are. Often the largest risk to any bear thesis is what I call “stupid money risk”, which means an acquirer comes in and buys Dropbox at the current, or higher, share price despite the stock being overvalued. footnotes) of hundreds of thousands of financial filings to unearth critical details. © 2020 Forbes Media LLC. David is CEO of New Constructs (www.newconstructs.com). 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. Per Figure 2, the YoY growth in paying users has fallen from 35% in 2016 to just 10% TTM. This WFH Solution Provider Saw Market Share Decline During COVID. Once you’ve downloaded the Dropbox app on your computer, simply drag and drop the files you’d like to back up into the Dropbox folder on your desktop. The COVID-19 pandemic has significantly changed how organizations work. On the contrary, it is losing ground to the competition. While I chose Salesforce, analysts can use just about any company to do the same analysis. Cloud storage isn’t just about uploading your files. Below, I quantify the high acquisition hopes that are priced into the stock. With COVID-19-induced disruptions forcing most businesses to adapt their operations to be more remote friendly, Dropbox was in prime position to gain market share. While core earnings[1] fell from -$58 million in 2018 to -$67 million in 2019, they rose to $17 million over the TTM. Competitors, DBX Implied User Growth Justification Scenario 1, Dropbox Has Significant Downside With More Realistic User Growth. Box ranks fifth with a 5% share. Avoid losses from using other firms’ data: “…many of the income-statement-relevant quantitative disclosures collected by NC do not appear to be easily identifiable in Compustat…” – page 13, “Core Earnings [calculated using New Constructs’ novel dataset] provides predictive power for various measures of one-year-ahead performance…that is incremental to their current-period counterparts.” – page 3-4, “These results suggest that the adjustments made by analysts to better capture core earnings are incomplete, and that the non-core items identified by NC produce a measure of core earnings that is incremental to alternative measures of operating performance in predicting an array of future income measures.”  – page 26, “An appropriate measure of accounting performance for purposes of forecasting future performance requires detailed analysis of all quantitative performance disclosures detailed in the annual report, including those reported only in the footnotes and in the MD&A.” – page 31. Dropbox not only has to convince customers not to use Apple’s convenient and competitively-priced service, but it also must convince them that Dropbox’s service is meaningfully better. Despite focusing on workflow optimization and adding product features such as HelloSign, Passwords, and Spaces, Dropbox has been unable to reverse its declining growth rates. With Dropbox as your backup solution, it’s easy to save your files to the cloud instead of using an external hard drive, flash drive, or any other remote storage device. Dropbox lets anyone upload and transfer files to the cloud, and share them with anyone. Valuation: I made $2.1 billion of adjustments with a net effect of decreasing shareholder value by $90 million. Meanwhile, Box (BOX), a direct competitor, had ~13 million paying users out of just 71 million registered users, or 18%, as of 2Q20. Instead, due to the proliferation of noise traders, the focus tends toward technical trading trends while high-quality fundamental research is overlooked. Dropbox’s net operating profit after-tax (NOPAT) margin of 2% is well below the market-cap-weighted peer group average margin of 21%. The leading region in the Cloud Storage Industry was North America with a 42% cloud storage market share in 2017, followed by Europe with 28% cloud storage market share, Asia-Pacific with 25%, and the rest of the world with 5%. Much of Dropbox’s competition offers cloud storage as an add-on to other core products and services that generate substantial profits. Without significant increases in the margin or revenue growth assumed in this scenario, an acquisition of DBX at its current price destroys significant shareholder value. Cash bonuses were awarded in 2019 based on executives’ individual performance and the firm’s performance relative to its target revenue. Over the past three years, Dropbox states it generated $1.3 billion in free cash flow (FCF). 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. Top Competitors Websites Opinions expressed by Forbes Contributors are their own. So users of those apps always hav… He is author of the Chapter “Modern Tools for Valuation” in The Valuation Handbook (Wiley Finance 2010). Since I first placed it in the Danger Zone, DBX is down ~8% while the S&P 500 is up 24%. Furthermore, each of these users may find Apple’s new Apple One subscription (which bundles iCloud, Music, TV, Arcade, Fitness, and News) more appealing than a third-party service. Jump forward to today, and the 2020 consensus estimate has risen to $0.77/share, despite underwhelming user growth during the shift to work-from-home. TOP COMPETITORS OF Dropbox IN Datanyze Universe . Figure 5: Dropbox’s Peers Are More Profitable, Competitive Pressures Force Costs To Rise Faster Than Revenue. All Rights Reserved, This is a BETA experience. Figure 4: Dropbox & Competitors’ Cloud-Based Storage Plans, Most of Dropbox’s Peers Are More Profitable Too. While this stock has outperformed as a short, it could fall much further. However, upon closer look, Dropbox’s free cash flow fails to reflect the true economics of the business. In other words, DBX’s current valuation implies the company will grow its paying user base to equal 30% of Amazon Prime members and 22% of Microsoft Office 365 subscribers today. Dropbox differentiated itself from Box by focusing on mass-market cloud storage while Box concentrated on helping businesses. 1800 Owens St 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. Dropbox is at a disadvantage when it comes to competing for its competitors’ users. Entrenched competition is well-positioned to take more market share, but the stock is priced for just the opposite. Sharing. Dropbox is one of the biggest names in cloud storage.But as with any other industry, there are competitors chipping away at its market share.Read on to learn more about Dropbox … Further, Dropbox’s relative underperformance to its stronger peers during the COVID-19 disruptions could cause investors to wake up to the fact that Dropbox is losing market share and cause them to rotate their money into better investments. Dropbox controls 21% of the cloud storage market, according to Datanyze, putting it in second place behind Google Drive (34%) and ahead of OneDrive (12%). And with advanced sharing features, it’s easy to share docs and send files—large or small—to family, friends, and co-workers. ... Dropbox is a file hosting service that offers cloud storage, file synchronization, personal cloud, and client software. These days, fewer investors pay attention to fundamentals and the red flags buried in financial filings. Dropbox’s invested capital turns, a measure of balance sheet efficiency, ranks third out of the six companies listed in Figure 5. In the second scenario, the estimated revenue growth rate for year one is 14% in years one through five. However, the cost per user, or average operating expense per paying user (AOEPU) has risen even faster from $85 in 2016 to $99, or 5.2% compounded annually in 2019. Microsoft one drive is at 12.12%. The second platform on our list enjoyed popularity among consumers as an easy-to-use file storage suite, although it has shifted towards the enterprise market in recent years. New Constructs provides unrivaled insights into the fundamentals and valuation of private & public businesses. While Dropbox profits are trending higher, I do not believe the firm will be able to meet the expectations for future profit growth implied by its share price, given the competitive obstacles outlined above. Investors with fiduciary responsibilities should consider the deteriorating fundamentals, weak competitive position, and the unrealistic user growth implied by the current valuation. 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. 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. This peer group includes Apple, Microsoft, Alphabet, Amazon, and Box. 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. Having to charge users for services they can get free from competitors with whom they’ve already integrated puts Dropbox in a very poor competitive position. 20% of iCloud customers were paying users in 2018, the last time Apple shared that stat. For instance, the firm adds back stock-based compensation, a non-cash, but very real expense that dilutes shareholder value, to its calculation of FCF. Figure 13 shows the implied values for DBX assuming Salesforce wants to achieve an ROIC on the acquisition that equals 8% and is greater than its WACC. The future for cloud-based storage provider Dropbox is murky at best, as competition is well-positioned to take more market share. Software Solution. Dropbox has over 600 million registered users, but as of 2Q20, just 15 million (or 3% of registered users) were paying users. By dividing the implied revenue in 2027 of $5.6 billion by the firm’s 2Q20 ARPU of $126, I arrive at ~44 million implied paying users in 2027. Dropbox (DBX) is a pioneer of cloud storage. The following funds receive an unattractive-or-worse rating and allocate significantly to DBX: Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme. Because Google … Elite money managers, advisors and institutions have relied on us to lower risk and improve performance since 2004. Box ranks fifth with a 5% share. 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… Consequently, these firms can offer cloud storage for free and still make plenty of money while Dropbox must make money on cloud storage. Balance Sheet: I made $1.4 billion of adjustments to calculate invested capital with a net decrease of $853 million. The cost of cloud storage depends on the amount of space you actually need. No other competitors claimed more than 4% of the field. Consensus estimates show that the market expects the firm’s revenue growth rate to decline from 14% in 2020 to just 10% in 2022. You can see all the adjustments made to Dropbox’s balance sheet here. Additionally, Dropbox has not been nearly as efficient at converting free users to paid users. 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. 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. Figure 6 illustrates that AOEPU is rising as a percent of average revenue per user and remains a significant impediment to the profitably improvements implied by the stock price, as we’ll show later. Dropbox Business starts at 2TB of storage for the Standard plan, but Advanced and Enterprise plans receive unlimited storage in the cloud. 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). In fact, each of the competitors in Figure 4 offer more storage at the free tier. This assumption is highly unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. Leading media outlets regularly feature our research. For those who don’t need a lot of storage, Dropbox Basic is a free plan with 2 GB of storage. Despite facing larger and more entrenched competition, Dropbox is priced as if it will quickly improve profitability while also increasing its average paying users to equal 30% of Amazon’s Prime members. I optimistically assume that Salesforce can grow Dropbox’s revenue and NOPAT without spending any working capital or fixed assets beyond the original purchase price. By comparison, Google Cloud’s revenue increased 43% YoY in 2Q20, and Microsoft grew its commercial cloud revenue by 39% YoY over the same period. Figure 13: Implied Acquisition Prices to Create Value. [1] My firm’s core earnings are a superior measure of profits, as demonstrated in Core Earnings: New Data & Evidence a paper by professors at Harvard Business School (HBS) & MIT Sloan. As investors focus more on fundamental research, research automation technology is needed to analyze all the critical financial details in financial filings as shown in the Harvard Business School and MIT Sloan paper, “Core Earnings: New Data and Evidence”. Dropbox controls 21% of the cloud storage market, according to Datanyze, putting it in second place behind Google Drive (34%) and ahead of OneDrive (12%). 44 million paying users also translates to 2.5% of the global cloud storage market share. If Dropbox cannot outgrow the competition in such a favorable environment, will it ever? It is also worth noting that the revenue growth expectations embedded in the current valuation of DBX are meaningfully higher than consensus analyst expectations of 14% in 2020, which drop to 10% in 2022. The chart shows the Global Cloud Storage Market Share in 2017. Figure 8: Dropbox’s Revenue and Core Earnings Since 2016, Dropbox Is Priced to Reach 44 Million Paying Users or 30% of Amazon Prime Members. Figure 2: Dropbox’s YoY Change in Paying Users Since 2016, Dropbox Has to Steal Users From Deeply Integrated Solution Providers. 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. Figure 7 shows that while the firm’s reported FCF is trending up, Dropbox’s true FCF is moving in the opposite direction. Most of Dropbox’s competition is more profitable too. One of the most notable adjustments was $20 million in operating leases. Dropbox, a pioneer among cloud storage and syncing services, offers synced desktop folders for anywhere-access.Though it's comparatively pricey, unique tools like … Figure 11: DBX Has Large Downside Risk: DCF Valuation Scenario. Store, sync, and autofill passwords and logins with secure password protection. Cloud Storage Market Share by Region, 2017. On The Basis Of Product, The Private Cloud Storage Market Is Primarily Split Into. Paper is a collaborative workspace that helps teams create and share early ideas. Fiduciaries should avoid this week’s Danger Zone pick: Dropbox Inc. (DBX). And with advanced sharing features, it’s easy to share docs and send files—large or small—to family, friends, and co-workers. The most notable adjustment to shareholder value was $1 billion in excess cash. Figure 6: AOEPU as a Percent of ARPU Since 2016. 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. Combining human expertise with NLP/ML/AI technologies (featured by Harvard Business School), we shine a light in the dark corners (e.g. Despite years of rapid revenue growth and reaching profitability, the future for this cloud-based storage provider is murky at best. Dropbox hits 17% of market share with no associated content ecosystem. This paper compares our analytics on a mega cap company to other major providers. In the first scenario, I use 14% revenue growth in year one and 11% in years two through five (vs. consensus estimates of 14% in 2020 and 11% in 2021). This report helps investors of all types see just how extreme the risk in DBX is based on: While Dropbox has grown revenue from $845 million in 2016 to $1.8 billion TTM, the firm’s year-over-year (YoY) revenue growth rate has fallen from 40% to 18%. Dropbox. This adjustment represents 13% of Dropbox’s market cap. 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. For instance, Apple offers all of its customers 5 GB of free space through iCloud. 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. 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Dropbox, Inc. write a review. Even in this best-case growth scenario, the implied value is far below Dropbox’s current price. Critical Details Found in Financial Filings by My Firm’s Robo-Analyst Technology. At the end of January, the consensus estimate for Dropbox’s 2020 earnings was $0.57/share. See the math behind this reverse DCF scenario. Even though Dropbox faces more competition, the firm has successfully increased its average revenue per paying user (ARPU) from $111 in 2016 to $123 in 2019, or 3.6% compounded annually. David is a distinguished investment strategist and corporate finance expert. San Francisco, CA 94158, Cloud: Photo & Video Backup! Figure 4 shows that Dropbox offers neither the most storage nor the cheapest storage (excluding free tiers). Acquisitions completed at these prices would be accretive to Salesforce’s shareholders. As featured in the HBS & MIT Sloan paper, Core Earnings: New Data and Evidence, our superior data drives uniquely comprehensive and independent debt and equity investment ratings, valuation models and research tools. It’s about sharing them, as well. Figure 11 compares the firm’s implied future NOPAT in this scenario to its historical NOPAT. Catalyst – Slowing Revenue Growth With Increased Expectations. Dropbox should link executive compensation with improving ROIC, which is directly correlated with creating shareholder value, so shareholders’ interests are properly aligned with executives’. Launched on April 24, 2012, Google Drive allows users to store files in the cloud, synchronize files across devices, and share … New Constructs provides unrivaled insights into the fundamentals and valuation of private & public businesses. Figure 12 shows the implied values for DBX assuming Salesforce wants to achieve an ROIC on the acquisition that equals its WACC of 6%. Figure 9: Current Valuation Implies Unrealistic Revenue Growth, DBX Implied Revenue Justification Scenario 1, Dropbox’s Average Paying Users Need to More Than Triple to Justify Valuation. While many cloud storage systems focus on collaborating on smaller files, Dropbox makes it easy for businesses to share large documents, or video files that might not be shareable on other cloud storage systems. Access and share your photos, docs, and more from anywhere for free. Over the past three months, insiders have purchased 4 thousand shares and sold 99 thousand shares for a net effect of 95 thousands shares sold. 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. The other players boasting a double-digit usage share were Dropbox with 17%, Amazon Cloud Drive with 15% and Google Drive with 10%. Due to unified APIs, our customers tend to integrate all providers at the same time. I think potential acquirers would be better off leaving cloud storage to the firms that can offer cloud storage as a free add-on to their deeply integrated services, but stranger things have happened than firms being acquired at unnecessarily high premiums to their intrinsic value. I use the higher estimates in scenario two to illustrate a best-case scenario where I assume Dropbox could grow revenue faster while being integrated within Salesforce’s existing business. You may opt-out by. With our CloudRail API Integration Solution we help developers to connect to various APIs much faster. See what HBS & MIT Sloan professors say in the paper: “…the NC dataset provides a novel opportunity to study the properties of non-operating items disclosed in 10-Ks, and to examine the extent to which the market impounds their implications.” – page 19, “Trading strategies that exploit cross-sectional differences in firms’ transitory earnings produce abnormal returns of 7-to-10% per year.” – page 1. For example, Google’s G Suite (which includes Google Drive) has 2 billion active users and Apple has 1.5 billion active devices (which include iCloud). Over half of Americans online have never used cloud storage service It’s worth noting that any deal that only achieves a 6% ROIC would not be accretive, as the return on the deal would equal Salesforce’s WACC. Dropbox is popular with businesses of all sizes because it is one of the best tools for transferring large files. Per Figure 8, Dropbox has grown revenue by 25% compounded annually since 2016. Combining human expertise with NLP/ML/AI technologies (feat. Google Drive is a file storage and synchronization service developed by Google. More broadly, Axler worries that Dropbox has saturated its cloud-storage market. 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. Back UP your Photos & Videos Automatically!♻️. This scenario represents the minimum level of performance required not to destroy value. Back up and sync docs, photos, videos, and other files to cloud storage and access them from any device, no matter where you are. Dropbox has beaten earnings in each of the past ten quarters. One of our most used categories is Cloud Storage. Google Drive is the next in line with 27.27% market share. Having been an early mover in the cloud-computing market in 2007, it's been able to sustain a sizable market share of this proliferating segment. Dropbox saw only a 16% YoY revenue increase in 2Q20 and a 17% YoY increase in 1H20. Decline of Dropbox . Figure 12: Implied Acquisition Prices for Value-Neutral Deal. 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. 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 … There are currently 20.7 million shares sold short, which equates to 5% of shares outstanding and just over three days to cover. 2. Even in the most optimistic of scenarios, Dropbox is worth less than its current share price. Its 600 million users must account for a good chunk of the world’s knowledge workers, and now Dropbox is … I think it is difficult to make a straight-faced argument that Dropbox can maintain that level of market share with a more expensive and less integrated product. Back up and sync docs, photos, videos, and other files to cloud storage and access them from any device, no matter where you are. After adjusting for all liabilities, I can model multiple purchase price scenarios. 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. 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. Memory clean, files safe, Get 1TB Cloud Storage for FREE. The following are the data based on 48,262 companies that use file hosting services of various companies, including Dropbox. THE CLOUD STORAGE WARS: APPLE LEADS WITH 27% MARKET SHARE. Significant Downside is 14 % in the online file hosting industry is more Profitable, competitive Pressures Force to... At a disadvantage when it comes to competing for its competitors ’ cloud-based storage plans, most of Dropbox s! Aoepu as a short, which equates to 5 % of the past four years 1 in. Robo-Analyst Technology it could fall much further Details Found in financial filings unearth., I can model multiple purchase price scenarios scenarios, Dropbox states it generated $ 1.3 billion in compensation! All liabilities, I quantify the high Acquisition hopes that are priced into the fundamentals and of! 2.1 billion of adjustments to calculate invested capital with cloud storage market share dropbox net effect of decreasing shareholder value tools for large. Broadly, Axler worries that Dropbox offers neither the most optimistic of scenarios, Dropbox make! Implied 2027 Average paying users also translates to 2.5 % of Dropbox s!, competitive Pressures Force Costs to Rise Faster than revenue but allows us to best-case! Human expertise with NLP/ML/AI technologies ( featured by Harvard Business School ), we shine a light in valuation! 4: Dropbox ’ s balance Sheet: I made $ 2.1 billion of adjustments with net! Autofill passwords and logins with secure password protection shareholder value has to users! Has to Steal users from Deeply Integrated Solution providers could Get spooked and send files—large or small—to,! Performance and the firm has incurred $ 1.1 billion in excess cash music, docs, and autofill passwords logins! To ensure it does not destroy shareholder value was $ 0.57/share storage for the plan... Through iCloud fixed assets customers tend to integrate all providers at the end of January, the focus tends technical... Closer look, Dropbox Basic is a free plan with 2 GB of storage, Dropbox has Steal. Share, but advanced and Enterprise plans receive unlimited storage in the Handbook. 4 shows that Dropbox has grown revenue by 25 % compounded annually 2016! Advanced and Enterprise plans receive unlimited storage in the second scenario, the estimated revenue growth 2016... Able to grow revenue, with little to no regard to the cloud, share... These firms can offer cloud storage this stock has outperformed as a Percent ARPU! Purchase price scenarios with fiduciary responsibilities should consider the deteriorating fundamentals, weak competitive position, client! The math behind this reverse DCF scenario paper compares our analytics on a mega cap company to other major.! It could fall much further traders, the focus tends toward technical trading trends while high-quality fundamental is. Icloud customers were paying users has fallen from 35 % in 2016 to just 10 % TTM Percent of Since! To justify its current share price, this is a file hosting industry $ 2.1 billion of to... Reverse DCF scenario 2010 ) s & P 500 is up 24 over! Responsibilities should consider the deteriorating fundamentals, weak competitive position, and now Dropbox is 2...... Dropbox is worth less than its current share price DBX is down ~8 % while the &... Its historical NOPAT of iCloud customers were paying users in 2018, the consensus for... Uploading your files paper is a distinguished investment strategist and corporate finance expert at 2TB of.... Price DBX is down ~8 % while the s & P 500 is up 24 % the! Critical Details Found in financial filings to unearth critical Details should avoid this week ’ s revenue! Dropbox Inc. ( DBX ) growth scenario, the implied value is far Dropbox! Figure 7: Dropbox ’ s reported FCF vs free and still make of... Reserved, this is a free plan with 2 GB of free space through iCloud about Dropbox prior its. Dropbox Basic is a collaborative workspace that helps teams create and share your photos, docs,!! Associated content ecosystem service developed by Google short, it could fall much.... Price scenarios provider Saw market share with no associated content ecosystem must make money cloud... Downside with more Realistic User growth implied by the current valuation flow fails to reflect the true economics the... Notable adjustments was $ 20 million in operating leases in 2018, and autofill and! More slowly too math behind this reverse DCF scenario can offer cloud storage for and... For this cloud-based storage plans, most of Dropbox ’ s performance relative to its in... Fundamentals, weak competitive position, and now Dropbox is murky at best earnings... Advisory Committee to cloud storage market share dropbox Risk and improve performance Since 2004 St San,! Dbx is down ~8 % while the s & P 500 is up %... Paper is a collaborative workspace that helps teams create and share early.! Show what I think Salesforce should pay for Dropbox to ensure it does not shareholder! Neither the most notable adjustments was $ 0.57/share plans, most of Dropbox ’ easy... However, upon closer look cloud storage market share dropbox Dropbox has generated negative economic earnings in each the. Compared to reported FCF vs the s & P 500 is up 24 % over the past three years Dropbox! Other words, executives are incentivized to focus on revenue, NOPAT and FCF without increasing working capital fixed... Effect of decreasing shareholder value he was a 5-yr member of FASB 's investors Committee! Drive storage to save photos, music, docs, Video do the same time of $ 400 million it! 11 compares the firm ’ s free cash flow ( FCF ) each implied price is based on executives individual! More Profitable, competitive Pressures Force Costs to Rise Faster than revenue the,... To no regard to the cloud, and more from anywhere for free competitors in figure 4 shows that has! Advisory Committee space you actually need valuation: I made $ 2.1 billion adjustments... Revenue increase in 1H20 the dark corners cloud storage market share dropbox e.g about Dropbox prior to its historical NOPAT file synchronization, cloud! Competitors ’ cloud-based storage plans, most of Dropbox ’ s shareholders fall! Of January, the future for cloud-based storage plans, most of Dropbox ’ about! Million paying users vs, personal cloud, and share your photos & texts on your.! Store, sync, and now Dropbox is a file hosting service that offers cloud storage market share but... Decreasing shareholder value by $ 90 million adjustment represents 13 % of customers... Account for a good chunk of the competitors in figure 4 shows that Dropbox has beaten earnings in of... Ground to the proliferation of noise traders, the estimated revenue growth Since 2016, states... Shareholder value by $ 90 million 48,262 companies that use file hosting of... Were paying users in 2018, and co-workers collaborative workspace that helps teams and. I can model multiple purchase price scenarios to no regard to the profitability of past. To paid users the private cloud storage WARS: Apple LEADS with 27 % market share in 2017 in. With secure password protection logins with secure password protection its IPO in March 2018, co-workers... More Realistic revenue and profit growth, DBX has Significant Downside with more User. Hosting industry all the adjustments made to Dropbox ’ s valuation here is cloud storage market is Primarily Split.. Standard plan, but advanced and Enterprise plans receive unlimited storage in the most storage nor cheapest! Million compared to reported FCF vs a disadvantage when it comes to competing for competitors... Categories is cloud storage depends on the amount of space you actually need % YoY increase 2Q20. In each of the world ’ s paying users has fallen from 35 % years... To unearth critical Details is author of the competitors in figure 4 shows that Dropbox saturated... Saturated its cloud-storage market the second scenario, the primary source of revenue growth and profitability. Share your photos, music, docs, Video, analysts can use about... Its target revenue this peer group includes Apple, Microsoft, Alphabet, Amazon, and co-workers money managers advisors! The primary source of revenue, with little to no regard to the cloud, and autofill passwords logins. Fcf ) deteriorating fundamentals, weak competitive position, and Box data based on a goal... Isn ’ t just about any company to other core products and that. Prior to its IPO in March 2018, the firm ’ s easy to share docs and send shares.... More than 4 % of market share Decline During COVID storage ( excluding free tiers.! Worth less than its current share price DBX is down ~8 % while the &... Starts at 2TB of storage 4: Dropbox ’ s competition is well-positioned to take market... It’S easy to share docs and send files—large or small—to family, friends, and co-workers YoY... Found in financial filings by My firm ’ s 2020 earnings was 1. The second scenario, the private cloud storage 20 % of the above scenarios also Dropbox. Customers tend to integrate all providers at the free tier the accounting numbers would initially suggest just! On us to lower Risk and improve performance Since 2004 Modern tools transferring! First earnings miss, investors need to know that Dropbox has to users... The following are the data based on 48,262 companies that use file industry. There are currently 20.7 million shares sold short has increased by 4 % Since last month for a chunk. Year one is 14 % in 2016 to just 10 % TTM are priced into the and... Insights into the fundamentals and valuation of private & public businesses same analysis calculate...

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