So as the FCF goes lower, the value of the stock goes higher.

The FCF yield is the annualized FCF divided by the stock’s market value. If the DBX FCF yield does better over the next four years, the stock could rise by more than 20% per year. In other words, if Dropbox stock follows its FCF growth, it could rise by at least 20% per year over the next 4 years. That works out to a compound annual growth rate of 20.1% each year. FCF will have to rise by $520 million, or 208%. We can project the level of growth that they foresee in the next four years ending 2024. For example, its Q2 FCF of $120 million works out to an annual FCF run rate of $480 million. They are at about the halfway mark right now. Moreover, Dropbox’s management forecasts that they expect to reach $1 billion in annual FCF by 2024. In other words, the company is getting more efficient at producing FCF as its revenue and FCF grows. First, this past quarter its FCF grew by $25 million over the past year, or up 26%.Īnd second, its FCF margin was just 23.7% last year, but in Q2 2020 it rose to 25.6%.

7 Big Tech Stocks to Buy for Blockchain and Crypto Exposureįor example, a year ago the company generated $95 million in FCF on revenue of $401.5 million.

This shows that Dropbox has a powerful business model. Most companies would love to have that high a ratio for their net income margin or even their gross income margin, much less an FCF margin. Revenue was $467.4 million so that means its FCF margin is very high at 25.6%. In the past quarter ending June 30, Dropbox generated $120 million in FCF.

That means the stock will be up at least that much and possibly higher. Moreover, earnings and FCF should grow at least 16% next year. As such, it is a steady revenue and FCF earner. Dropbox's valuations should limit its downside potential, and it might still be an appealing takeover target - but it's just not a compelling investment when other tech stocks offer much stronger growth.Dropbox makes money from annual subscriptions to its data storage business, mostly from small business and enterprise clients. But it's cheap because investors expect its growth to decelerate, and for its GAAP earnings to remain in the red. Is Dropbox worth buying?ĭropbox's stock looks cheap at 16 times forward earnings and less than five times this year's sales.

In short, it's merely repurchasing its own shares to offset the dilution from its own stock bonuses. However, Dropbox's number of outstanding shares actually increased nearly 1% in 2020. It plans to follow up that program with another $1 billion buyback plan. It authorized a $600 million buyback program in early 2020, repurchased nearly $400 million in shares throughout the year, and plans to exhaust the program in the first quarter of 2021. Lastly, Dropbox is constantly buying back its own shares, which is an odd strategy for an unprofitable tech company that should be focused on growth. It posted a net loss of $256.3 million in fiscal 2020, compared to a loss of $57.2 million in 2019, mainly due to non-recurring real estate impairment charges in the fourth quarter.ĭropbox should post a narrower loss in 2021, but its high stock-based compensation expenses - which gobbled up 14% of its revenue in 2020 - should prevent it from turning profitable anytime soon. Second, Dropbox has remained unprofitable by GAAP measures ever since its IPO in 2018.

Google, Microsoft, and Amazon can afford to operate their cloud storage platforms at losses to tether more users to their other cloud services, but Dropbox and Box can't. In other words, Dropbox's slowdown will continue as the cloud storage market matures and the top platforms lose their pricing power.

Dropbox stock forecast 2020