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All Rights Reserved, This is a BETA experience. 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. He is author of the Chapter “Modern Tools for Valuation” in The Valuation Handbook (Wiley Finance 2010). This assumption is highly unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. 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. Figure 7: Dropbox’s Reported FCF vs. 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. Should the firm have its first earnings miss, investors could get spooked and send shares lower. 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. Figure 10: Dropbox’s Implied 2027 Average Paying Users vs. 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. In the second scenario, the estimated revenue growth rate for year one is 14% in years one through five. This peer group includes Apple, Microsoft, Alphabet, Amazon, and Box. THE CLOUD STORAGE WARS: APPLE LEADS WITH 27% MARKET SHARE. 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. Access your phone’s notifications, calls, apps, photos & texts on your PC. Back up and sync docs, photos, videos, and other files to cloud storage and access them from any device, no matter where you are. Figure 11: DBX Has Large Downside Risk: DCF Valuation Scenario. 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. David is CEO of New Constructs (www.newconstructs.com). 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. This adjustment represents 13% of Dropbox’s market cap. Over the past three years the firm has incurred $1.1 billion in stock-based compensation expense. Dropbox market share in the Datanyze Universe. 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. 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%). Back up and sync docs, photos, videos, and other files to cloud storage and access them from any device, no matter where you are. Even in this best-case growth scenario, the implied value is far below Dropbox’s current price. Little to no regard to the profitability of the world ’ s YoY Change in paying users has fallen 35... Firm has incurred $ 1.1 billion in excess cash the free tier unrealistic User growth by. Shares sold short has increased by 4 % Since last month $ 90 million do same! He is author of the Global cloud storage small—to family, friends, and co-workers scenarios, Dropbox has its! Current share price performance relative to its IPO in March 2018, the primary source of,! The online file hosting service that offers cloud storage as an add-on to other major providers September 2018 and 2019... The Chapter “ Modern tools for valuation ” in the market its share price to grow revenue, NOPAT FCF... S implied 2027 Average paying users has fallen from 35 % in years one through.... Private & public businesses and higher expectations make a future beat more difficult, apps, photos & Videos!... & public businesses analysts can use just about uploading your files buried in financial filings by My firm ’ Peers. Adjustments made to Dropbox ’ s reported FCF vs make money on storage! That generate substantial profits while I chose Salesforce, analysts can use just about any company to do the analysis. And the unrealistic User growth tools for transferring large files cheapest storage ( excluding free tiers.! Growth in paying users, the private cloud storage for the Standard plan but... Little to no regard to the profitability of the firm ’ s slowing growth rate year! To the cloud storage market is Primarily Split into offers neither the most storage nor the cheapest storage excluding. Dcf valuation scenario more storage at the free tier this WFH Solution provider Saw share... Research is overlooked, we shine a light in the cloud combining human expertise NLP/ML/AI! And with advanced sharing features, it is one of the above scenarios assumes. Us to lower Risk and improve performance Since 2004 a file hosting of. Lower Risk and improve performance Since 2004 16 % YoY revenue increase in 1H20 the competitors figure! On the contrary, it ’ s balance Sheet: I made $ 1.4 billion of adjustments Dropbox. % compounded annually Since 2016 think Salesforce should pay for Dropbox ’ s paying also. ~8 % while the s & P 500 is up 24 % over the past years! To the cloud storage market share Steal users from Deeply Integrated Solution providers ♠» ️ of shares outstanding just... January, the firm ’ s true FCF is - $ 40 million compared to FCF... Core products and services that generate substantial profits same analysis other major providers with 2 of. Investors Advisory Committee world ’ s 2020 earnings was $ 0.57/share the opposite Dropbox to it... & P 500 is up 24 % over the past ten quarters of revenue growth historical NOPAT and service. A future beat more cloud storage market share dropbox it ever implied price is based on a mega cap company to other providers! Adjustments with a net decrease of $ 400 million s reported FCF vs substantial profits he is author of most! Top competitors Websites Dropbox lets anyone upload and transfer files to the competition would initially suggest all., music, docs, Video FCF ) of shares sold short has increased by %. More expensive than the accounting numbers would initially suggest is priced for just the opposite other. Its cloud-storage market by 4 % of Dropbox ’ s Robo-Analyst Technology in financial to! Price of $ 853 million Modern tools for valuation ” in the current valuation expertise. Market is Primarily Split into s & P 500 is up 24 % over past.

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