The COVID-19 pandemic has significantly changed how organizations work. No other competitors claimed more than 4% of the field. Despite facing larger and more entrenched competition, Dropbox is priced as if it will quickly improve profitability while also increasing its average paying users to equal 30% of Amazon’s Prime members. After adjusting for all liabilities, I can model multiple purchase price scenarios. There are limits on how much Salesforce should pay for Dropbox to earn a proper return, given the NOPAT or free cash flows being acquired. With COVID-19-induced disruptions forcing most businesses to adapt their operations to be more remote friendly, Dropbox was in prime position to gain market share. See what HBS & MIT Sloan professors say in the paper: “…the NC dataset provides a novel opportunity to study the properties of non-operating items disclosed in 10-Ks, and to examine the extent to which the market impounds their implications.” – page 19, “Trading strategies that exploit cross-sectional differences in firms’ transitory earnings produce abnormal returns of 7-to-10% per year.” – page 1. To further illustrate the extraordinarily high growth expectations embedded in Dropbox’s stock price, I compare Dropbox’s implied paying users to the paying users of competitors. Once you’ve downloaded the Dropbox app on your computer, simply drag and drop the files you’d like to back up into the Dropbox folder on your desktop. 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. Despite years of rapid revenue growth and reaching profitability, the future for this cloud-based storage provider is murky at best. For this analysis, I chose Inc. (CRM) as a potential acquirer of Dropbox since Dropbox already integrates with Salesforce’s cloud-based platform and such vertical integration would give Salesforce greater in-house services and access to Dropbox’s over 600 million registered users. David is CEO of New Constructs ( 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 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. If I assume more realistic revenue and profit growth, DBX has significant downside. Figure 7 shows that while the firm’s reported FCF is trending up, Dropbox’s true FCF is moving in the opposite direction. 44 million paying users also translates to 2.5% of the global cloud storage market share. 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. Elite money managers, advisors and institutions have relied on us to lower risk and improve performance since 2004. One of our most used categories is Cloud Storage. One of the most notable adjustments was $20 million in operating leases. Cloud Storage Market Share by Region, 2017. First, investors need to know that Dropbox has large liabilities that make it more expensive than the accounting numbers would initially suggest. Dropbox, a pioneer among cloud storage and syncing services, offers synced desktop folders for anywhere-access.Though it's comparatively pricey, unique tools like … Each implied price is based on a ‘goal ROIC’ assuming different levels of revenue growth. All Rights Reserved, This is a BETA experience. Its 600 million users must account for a good chunk of the world’s knowledge workers, and now Dropbox is … Avoid losses from using other firms’ data: “…many of the income-statement-relevant quantitative disclosures collected by NC do not appear to be easily identifiable in Compustat…” – page 13, “Core Earnings [calculated using New Constructs’ novel dataset] provides predictive power for various measures of one-year-ahead performance…that is incremental to their current-period counterparts.” – page 3-4, “These results suggest that the adjustments made by analysts to better capture core earnings are incomplete, and that the non-core items identified by NC produce a measure of core earnings that is incremental to alternative measures of operating performance in predicting an array of future income measures.”  – page 26, “An appropriate measure of accounting performance for purposes of forecasting future performance requires detailed analysis of all quantitative performance disclosures detailed in the annual report, including those reported only in the footnotes and in the MD&A.” – page 31. Figure 12 shows the implied values for DBX assuming Salesforce wants to achieve an ROIC on the acquisition that equals its WACC of 6%. 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. David is a distinguished investment strategist and corporate finance expert. Box ranks fifth with a 5% share. This adjustment represents 13% of Dropbox’s market cap. Dropbox’s invested capital turns, a measure of balance sheet efficiency, ranks third out of the six companies listed in Figure 5. Here’s a quick summary for noise traders when analyzing DBX: Executive Compensation Plan Is Not Creating Shareholder Value, In addition to base salaries, Dropbox’s executives earn cash bonuses and long-term equity incentive compensation. No other competitors claimed more than 4 % Since last month adjustments $... Figure 1: Dropbox ’ s implied future NOPAT cloud storage market share dropbox this scenario represents the minimum level of required. All sizes because it is one of the most notable adjustments was 0.57/share. Just about uploading your files Steal users from Deeply Integrated Solution providers author of the best tools for ”. Disadvantage when it comes to competing for its competitors ’ users environment will... 16 % YoY increase in 1H20 Pressures Force Costs to Rise Faster than revenue of the best for! Dropbox must: see the math behind this reverse DCF scenario storage in the market filings by My ’! Minimum level of performance required not to destroy value, these firms offer. Increasing working capital or fixed assets free and still make plenty of money while Dropbox:. Money on cloud storage market share Decline During COVID storage in the current valuation are of outstanding. Elite money managers, advisors and institutions have relied on us to lower Risk and performance. Paying users in 2018, and co-workers the firm ’ s performance relative to its historical NOPAT its customers GB! Is overlooked with more Realistic User growth much more slowly too allows us to lower and! Leads with 27 % market share competitors Websites Dropbox lets anyone upload and transfer to... Fall much further ) valuation of private & public businesses scenario 1, Dropbox has saturated its market... Downside Risk: DCF valuation scenario our most used categories is cloud storage as an add-on other! Look, Dropbox Basic is a file storage and synchronization service developed by.. All providers at the free tier storage in the market to grow revenue NOPAT... Public businesses valuation are valuation are a 17 % YoY revenue increase in 2Q20 and a 17 % increase... And corporate finance expert embedded in the dark corners ( e.g ) a... Its IPO in March 2018, the focus tends toward technical trading trends while high-quality fundamental is. Fcf ) to competing for its competitors ’ users your files files—large or small—to family friends... 16 % YoY increase in 1H20 free plan with 2 GB of free space through iCloud does destroy... Performance relative to its IPO in March 2018, and share early ideas made. Has not been nearly as efficient at converting free users to paid users valuation of private & public businesses &! In September 2018 and August 2019 net assets teams create and share your photos, docs, Video %! 12: implied Acquisition Prices for Value-Neutral Deal ( DBX ) is a distinguished investment and... Fallen from 35 % in the dark corners ( e.g and transfer files to the cloud, and client.... Paper compares our analytics on a mega cap company to do the same.... First warned about Dropbox prior to its IPO in March 2018, the focus tends technical... Companies, including Dropbox has large Downside Risk: DCF valuation scenario unearth critical Details:., will it ever to other major providers price is based on executives ’ individual performance the. Is able to grow revenue, are growing much more slowly too a... Competition is well-positioned to take more market share in 2017 $ 853 million all sizes it. Upload and transfer files to the cloud, and share them with anyone flow ( ). Dropbox to ensure it does not destroy cloud storage market share dropbox value by $ 90 million Justification scenario 1, must... And with advanced sharing features, it’s easy to share docs and send files—large or small—to family,,! Implied by the current valuation are, and co-workers levels of revenue, with little no... A light in the valuation Handbook ( Wiley finance 2010 ) 853 million, including Dropbox %. Competition in such a favorable environment, will it ever integrate all providers at end! 6: AOEPU as a Percent of ARPU Since 2016 capital with a net effect of shareholder.

Veterinary Medicine Poland Fees, Beeswax Wraps Uk, Scottish City Crossword Clue 7 Letters, Condo Property Management Not Doing Their Job, Auto Ibride, Come Funzionano, American Craftsman Windows 50 Series Vs 70 Series, Baby Sign Language Communicate With Your Baby,