by Ian Harvey
April 28, 2020
Dropbox Stock jumped 3.8% intraday yesterday, to finally settle at $20.80, up 2.94% (+0.59), at market close. This cloud-based company is benefiting from the work-and-learn-from home necessity due to the pandemic lockdown.
And Members of Stock Options Made Easy are already in profit on their CALL OPTIONS.
Where to now?
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.
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.
As well, 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.”
Influencing Factors for Dropbox.....
Due to the global lockdown, workers now need to work from home which is propelling demand for cloud storage.
Also, the company is benefiting from the evolving workspace demands for seamless enterprise communication tools.
As well, integration with leading applications like Zoom Video, Slack and Atlassian will likely expand the Dropbox paying-user base over the long run.
Dropbox has an expected earnings growth rate of 40% for the current year. The Consensus Estimate for DBX's full-year earnings has moved 135.71% higher within the past quarter. This signals that analyst sentiment is improving and the stock's earnings outlook is more positive.
Dropbox is expected to report earnings on May 07, 2020 after the market closes.
On 31 December 2019, the US$8.1b market-cap posted a loss of -US$52.7m for its most recent financial year.
But, consensus from the 14 Software analysts is DBX is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of US$36m in 2021. DBX is therefore projected to breakeven around a couple of months from now!
Working backwards from analyst estimates, it turns out that they expect the company to grow 49% year-on-year, on average!
Dropbox currently has no debt on its balance sheet, which is rare for a loss-making growth company, which typically has high debt relative to its equity. DBX currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.
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