Dropbox has beaten earnings in each of the past ten quarters. San Francisco, CA 94158, Cloud: Photo & Video Backup! Dropbox should link executive compensation with improving ROIC, which is directly correlated with creating shareholder value, so shareholders’ interests are properly aligned with executives’. Acquisitions completed at these prices would be accretive to Salesforce’s shareholders. 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. Figure 12: Implied Acquisition Prices for Value-Neutral Deal. 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 A newer version of this report is available: Cloud Storage Report 2017 CloudRail, a leader in API integration management solutions for app developers, released a new report analyzing … On the contrary, it is losing ground to the competition. 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. 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.”. This assumption is highly unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. There are currently 20.7 million shares sold short, which equates to 5% of shares outstanding and just over three days to cover. New Constructs provides unrivaled insights into the fundamentals and valuation of private & public businesses. The following are the data based on 48,262 companies that use file hosting services of various companies, including Dropbox. Combining human expertise with NLP/ML/AI technologies (featured by Harvard Business School), we shine a light in the dark corners (e.g. 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. Inferior Offering at Higher Cost Limits Growth. 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%). Critical Details Found in Financial Filings by My Firm’s Robo-Analyst Technology. And with advanced sharing features, it’s easy to share docs and send files—large or small—to family, friends, and co-workers. This peer group includes Apple, Microsoft, Alphabet, Amazon, and Box. Hardware Solution Balance Sheet: I made $1.4 billion of adjustments to calculate invested capital with a net decrease of $853 million. Per Figure 2, the YoY growth in paying users has fallen from 35% in 2016 to just 10% TTM. 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. 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. 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. Consensus estimates show that the market expects the firm’s revenue growth rate to decline from 14% in 2020 to just 10% in 2022. Dropbox market share in the Datanyze Universe. 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. This scenario represents the minimum level of performance required not to destroy value. David is CEO of New Constructs (www.newconstructs.com). He was a 5-yr member of FASB's Investors Advisory Committee. This paper compares our analytics on a mega cap company to other major providers. With our CloudRail API Integration Solution we help developers to connect to various APIs much faster. The combination of the firm’s slowing growth rate and higher expectations make a future beat more difficult. 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 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. Dropbox Business starts at 2TB of storage for the Standard plan, but Advanced and Enterprise plans receive unlimited storage in the cloud. Per Figure 8, Dropbox has grown revenue by 25% compounded annually since 2016. Dropbox differentiated itself from Box by focusing on mass-market cloud storage while Box concentrated on helping businesses. In the second scenario, the estimated revenue growth rate for year one is 14% in years one through five. The future for cloud-based storage provider Dropbox is murky at best, as competition is well-positioned to take more market share. No other competitors claimed more than 4% of the field. Elite money managers, advisors and institutions have relied on us to lower risk and improve performance since 2004. 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. 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. ... Dropbox is a file hosting service that offers cloud storage, file synchronization, personal cloud, and client software. 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. 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%). This WFH Solution Provider Saw Market Share Decline During COVID. Decline of Dropbox . However, upon closer look, Dropbox’s free cash flow fails to reflect the true economics of the business. 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. TOP COMPETITORS OF Dropbox IN Datanyze Universe . 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%. Paper is a collaborative workspace that helps teams create and share early ideas. Because Google … 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. 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%. footnotes) of hundreds of thousands of financial filings to unearth critical details. Launched on April 24, 2012, Google Drive allows users to store files in the cloud, synchronize files across devices, and share … The Appendix details exactly how we stack up. 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. 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 … 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). 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%. 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. Destroy shareholder value by $ 90 million as an add-on to other core products and services generate. Tiers ) again in September 2018 and August 2019 growth Justification scenario,... 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