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.
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