Dropbox Inc Earnings Break Out!

Reports Its First-Ever Net Income!

Stock Options Made Easy Members Now Up 116%!
 
More To Come?

by Ian Harvey
May 08, 2020

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Dropbox Inc reported yesterday its first-ever net income, in a quarter when demand for cloud software was bolstered by a shift to working from home.

And, Stock Options Made Easy “Cut-to-the-Chase” Members are already up potential profits of 116% based on a CALL OPTIONS trade.


Dropbox Inc (NASDAQ: DBX)

Dropbox reported earnings yesterday and had its first quarterly profit since its debut as a publicly traded company in 2018.

The San Francisco-based company, a pioneer in file-hosting services, reported first-quarter net income of $39.3 million, or 9 cents a share, compared with a loss of $7.7 million, or 2 cents a share, in the year-ago quarter. Revenue climbed 18% to $455 million from $385.6 million a year ago. Analysts had expected net income of 14 cents a share on sales of $446 million.

Dropbox Inc has exceeded analysts’ estimates for sales and profit every quarter since going public in March 2018.

“There is enormous opportunity,” Dropbox Inc Chief Executive Drew Houston said in a phone interview after the company announced better-than-expected quarterly results, its first profitable GAAP quarter, and offered revenue guidance that topped Wall Street estimates. “We’ve been laying the tracks for this [profitability] for a while. We got there ahead of schedule, and we’re in the early innings of seeing the financial impact” from COVID-19.

Paying users reached 14.6 million, compared with 13.2 million in the same period a year ago. Average revenue per paying user was $126.30, up from $121.04 for the year-ago period.

Also, Dropbox’s HelloSign electronic-signature technology, which it acquired for $230 million last year, flourished in March, with three times the number of signature requests from in January and February.

 The company’s shares, which closed at $21.89 in regular New York trading, climbed as high as $23.60 following the report. The stock has gained 22% this year. As of close of after-hours trading, Dropbox Inc shares had climbed 10.69% for Thursday.

The Recommended Trade.....

“Cut-To-The-Chase” Members executed a call options trade on Dropbox Inc on Wednesday, April 22, 2020.

“U.S. equity markets have been surging for the last three weeks, with the Nasdaq Composite index exiting the bear-market territory, as investors hope that the economy will recover from the coronavirus crisis. This optimism is backed by the combined efforts of the U.S. government and the Federal Reserve to pull the economy out of choppy waters.

However, the past two days doesn’t feel that this is happening quite as much as expected. But, in all recoveries this is a normal trend that is experienced.

In the last three weeks, both the U.S. government and the central bank announced massive stimulus packages to mitigate the economic damage from the coronavirus pandemic. The first major relief package of $2 trillion was announced on Mar 27 to aid individuals and small businesses, which have been hit hardest by the pandemic. The U.S. economy received another boost from the Fed on Apr 9, when it announced a $2.3-trillion infrastructure package.

The coronavirus outbreak has, surprisingly, opened up newer avenues of growth for tech companies. The pandemic-led global lockdown is fueling demand for PCs, notebooks and peripheral accessories, as an increasing number of workers and students are now working and learning from home.

The work-and-learn-from home necessity is also stoking demand for cloud storage. Furthermore, the lockdown has bolstered the usage of online and e-commerce services globally. Therefore, data-center operators are enhancing their capacities to accommodate the demand spike for cloud services.

Furthermore, the long-term growth prospects of tech companies look promising owing to continuous digital transformations. The rapid adoption of cloud computing, along with the ongoing integration of AI and machine learning, has been a major growth driver.

And, one Nasdaq-traded tech stock that is well poised to benefit from this space’s solid growth prospects is the cloud-based company Dropbox Inc (NASDAQ: DBX), providing a collaboration platform worldwide.

“The Cloud” has evolved from a budding innovation in tech into one of the largest factors driving growth in the technology sector in only a few years. Today, cloud computing is an integral part of software-related firms, which in turn has seen investors search for cloud-focused tech stocks.

In our increasingly mobile world, cloud computing has dramatically reshaped the way companies conduct business. The technology allows firms big and small, as well as individuals, to access all their vital information nearly anywhere. Cloud computing like the smartphone, is hardly a fad, and it seems nearly impossible to think that people will reverse course—unless the cybersecurity concerns become too high.

The San Francisco-headquarter company, which went public last March, has amassed over 500 million registered users around the globe and is working hard to convert more into paying customers, with a special focus on business clients. DBX’s paid users hit 13.2 million in Q1 2019, up from 11.5 million in the year-ago period. In early June last year, Dropbox announced the “biggest user-facing change” in company history that creates “one central location for all content,” including the Google Docs, Microsoft MSFT offerings, Slack WORK, and more. DBX introduced its new “Workspace.””

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COVID-19 and Dropbox Inc……

Demand for Dropbox’s services received a boost as coronavirus-related lockdowns forced employees to work from home, providing a greater need for cloud services to help workers collaborate and pass files between office and home computers.

“Our customers are turning to Dropbox for help with this transition to remote work,” Chief Executive Officer Drew Houston said in an interview. “We’ve certainly seen record trial volumes, we’ve seen increases in direct purchases, and we’ve seen increases in engagement.”

Dropbox said its number of paying customers climbed to 14.6 million in the period, up from 13.2 million a year ago.

The results highlight that in the age of COVID-19, work collaboration is most important as Americans work from home and share content with colleagues in far-flung locations. Since mid-March, the number of weekly active users of Dropbox’s redesigned desktop app is up about 60%, Houston said.

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Moving Forward.....

Dropbox Chief Financial Officer Ajay Vashee stirred things up in a conference call with analysts, saying he expects the company to show a profit for the full year as well. The company now sees $1.88 billion to $1.9 billion in full year revenue. Analysts have forecast $448 million in the second quarter and $1.86 billion this year. Dropbox had previously said in February that its goal was to become profitable by the end of the year.

“Certainly, a huge percentage of the world is being forced into a remote work state for the first time, but I think the effects of it will persist well beyond when we typically go back into the office,” Houston said during the conference call.

Analysts’ Reactions......

Analyst Charles King of Pund-IT Inc. said that Dropbox’s disciplined leadership and evolving product portfolio meant that it was really only a matter of time before it became profitable. But he said its progress has accelerated thanks to an alignment of skills and good fortune that most businesses can only dream of.

“Rather than pursuing the market opportunities that conventional wisdom says it should, the COVID-19 crisis and the shift to working-from-home methodologies means that instead, the market is pursuing Dropbox and other companies that can reliably support those solutions and workloads,” King said. “Given the shape of the pandemic and surveys that suggest that a substantial percentage of companies will continue supporting work-from-home policies after the pandemic recedes, Dropbox’s optimistic outlook seems entirely reasonable.”

Constellation Research Inc. analyst Holger Mueller agreed, saying he wasn’t surprised to see Dropbox doing so well as the Covid-19 pandemic is accelerating the digitization efforts of most enterprises.

“It’s good to see the vendor grow, and more importantly become profitable, a key metric in times of survival for many enterprises,” Mueller said. “Kudos to the executive team for also offering full year guidance. Now it needs to deliver.”

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AS ALWAYS THE DECISION IS YOURS!


An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.

It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!


Best of Trading,
Ian Harvey
Director of Stock Options Made Easy


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