DROPBOX
- as of 6/1/18
- DBX
Entry/Exit Point 29.30 / 32
52Wk Hi/Lo 27.75 - 34.83
number of 10% Sine Wave rolls in 1-yr chart 3 – not good
P/E n/a
Profitable or string of losses? Losses last 4 Qs
Current Ratio 1.25 bad
- Current Assets divided by Current Liabilities
- Rule of Thumb: 2 is considered adequate for manufacturers
LT Debt as a percent of capitalization bal sheet: no debt
- LT Debt / LT Debt + OE on balance sheet
Interest Coverage Ratio negative interest
- EBIT / I
- Rule of Thumb for Safety: 3-4
Cash Flow positive from ops
Insider Activity none (unusual)
Institutional Ownership 97.5% - herd problem
Short Interest ‘N/A’ - ??
Dividend none
10-K / 10-Q
5/11/18 10-Q
- Legal Proceedings patent infringement;
no material impact
- Risk Factors
* revenue growth rate declining
* history of net losses
* data breaches
* disruptive technology
* focus on large accounts may defer growth
* revenue fluctuates and share price volatile (good for Sine Wave investing)
* in 180 countries; regulatory and forex risks
* continued availability of cloud services
* tax law may cut use of net operating loss carry-forwards
* lease and revolving credit covenants (e.g., liens on IP), could kick in
* no dividends planned
- Related Party Transactions / Related Transactions benign
News Headlines
- Google News
* first public results: total number of paid users increase to 11.5 million (from 9.3 million a year ago); sticky customer base; increasing competition with deep-pocketed tech giants like Microsoft, Google and Apple; these competitors have the added advantage of being able to bundle their file-sharing service with other offerings, so Dropbox will always have high customer acquisition costs; the most expensive provider so will have to lower fees; simplicity of service is key
https://www.forbes.com/sites/greatspeculations/2018/05/21/dropbox-is-doing-well-but-looks-rich-in-the-face-of-industry-headwinds/#3787334536ed
* co. pays $1.7M to settle lawsuit over failure to disclose auto-renewal policies
https://www.infolawgroup.com/2018/05/articles/california/dropbox-settlement/
* only 11M of 500M users pay
https://www.benzinga.com/news/18/05/11771624/are-dropbox-shorts-going-to-be-the-big-winners
* DBX is number 3 behind Microsoft and Google for cloud file-sharing service
https://www.ciodive.com/news/microsoft-remains-top-file-sharing-service-outranking-google-drive-dropbo/523889/
* better than expected average revenue per user
https://www.thestreet.com/technology/dropbox-may-find-life-as-a-public-company-isn-t-all-it-s-cracked-up-to-be-14587160
* deals to integrate file management services with Google G-suite and Salesforce
https://techcrunch.com/2018/03/09/dropbox-announces-deeper-integration-with-salesforce-ahead-of-ipo/
* ‘it doesn’t look like a disaster like Snapchat’
http://money.cnn.com/2018/03/12/technology/dropbox-ipo-value/index.html
- Seeking Alpha
* nothing of further interest
- ProQuest (1 year)
* Dropbox Israeli team expected to double
* big increase in premium paying customers
Most recent earnings press release
5/10/18
* first quarter as a public company
* first quarter revenue of $316 million, up 28% year-over-year
* Paying users totaled 11.5 million, as compared to 9.3 million for the same period last year. Average revenue per paying user was $114.30, as compared to $110.79 for the same period last year.
* GAAP net loss was ($465.5) million, as compared to ($33.1) million in the same period last year.
* Free cash flow was $51.9 million, as compared to $56.5 million in the same period last year.
* Cash, cash equivalents and short-term investments were $846.0 million at the end of the first quarter of 2018.
Bottom Line
* very weak current position and losing money
* Cash burn rate is key: $846M in cash / $465M Q net loss = LESS THAN 2 QUARTERS LEFT. Revisit this before investing (it looks like their FCF is larger than previous net losses, so the cash burn rate could change markedly)
* strange numbers
* major vulnerabilities: big competitors who can bundle Dropbox out of existence
* OK for Sine Wave investing, but with low expectation. Not very volatile, relatively speaking, and swings narrowing. Expect less than a 10 percent return and mitigate risk by making small investment.
- as of 6/1/18
- DBX
Entry/Exit Point 29.30 / 32
52Wk Hi/Lo 27.75 - 34.83
number of 10% Sine Wave rolls in 1-yr chart 3 – not good
P/E n/a
Profitable or string of losses? Losses last 4 Qs
Current Ratio 1.25 bad
- Current Assets divided by Current Liabilities
- Rule of Thumb: 2 is considered adequate for manufacturers
LT Debt as a percent of capitalization bal sheet: no debt
- LT Debt / LT Debt + OE on balance sheet
Interest Coverage Ratio negative interest
- EBIT / I
- Rule of Thumb for Safety: 3-4
Cash Flow positive from ops
Insider Activity none (unusual)
Institutional Ownership 97.5% - herd problem
Short Interest ‘N/A’ - ??
Dividend none
10-K / 10-Q
5/11/18 10-Q
- Legal Proceedings patent infringement;
no material impact
- Risk Factors
* revenue growth rate declining
* history of net losses
* data breaches
* disruptive technology
* focus on large accounts may defer growth
* revenue fluctuates and share price volatile (good for Sine Wave investing)
* in 180 countries; regulatory and forex risks
* continued availability of cloud services
* tax law may cut use of net operating loss carry-forwards
* lease and revolving credit covenants (e.g., liens on IP), could kick in
* no dividends planned
- Related Party Transactions / Related Transactions benign
News Headlines
- Google News
* first public results: total number of paid users increase to 11.5 million (from 9.3 million a year ago); sticky customer base; increasing competition with deep-pocketed tech giants like Microsoft, Google and Apple; these competitors have the added advantage of being able to bundle their file-sharing service with other offerings, so Dropbox will always have high customer acquisition costs; the most expensive provider so will have to lower fees; simplicity of service is key
https://www.forbes.com/sites/greatspeculations/2018/05/21/dropbox-is-doing-well-but-looks-rich-in-the-face-of-industry-headwinds/#3787334536ed
* co. pays $1.7M to settle lawsuit over failure to disclose auto-renewal policies
https://www.infolawgroup.com/2018/05/articles/california/dropbox-settlement/
* only 11M of 500M users pay
https://www.benzinga.com/news/18/05/11771624/are-dropbox-shorts-going-to-be-the-big-winners
* DBX is number 3 behind Microsoft and Google for cloud file-sharing service
https://www.ciodive.com/news/microsoft-remains-top-file-sharing-service-outranking-google-drive-dropbo/523889/
* better than expected average revenue per user
https://www.thestreet.com/technology/dropbox-may-find-life-as-a-public-company-isn-t-all-it-s-cracked-up-to-be-14587160
* deals to integrate file management services with Google G-suite and Salesforce
https://techcrunch.com/2018/03/09/dropbox-announces-deeper-integration-with-salesforce-ahead-of-ipo/
* ‘it doesn’t look like a disaster like Snapchat’
http://money.cnn.com/2018/03/12/technology/dropbox-ipo-value/index.html
- Seeking Alpha
* nothing of further interest
- ProQuest (1 year)
* Dropbox Israeli team expected to double
* big increase in premium paying customers
Most recent earnings press release
5/10/18
* first quarter as a public company
* first quarter revenue of $316 million, up 28% year-over-year
* Paying users totaled 11.5 million, as compared to 9.3 million for the same period last year. Average revenue per paying user was $114.30, as compared to $110.79 for the same period last year.
* GAAP net loss was ($465.5) million, as compared to ($33.1) million in the same period last year.
* Free cash flow was $51.9 million, as compared to $56.5 million in the same period last year.
* Cash, cash equivalents and short-term investments were $846.0 million at the end of the first quarter of 2018.
Bottom Line
* very weak current position and losing money
* Cash burn rate is key: $846M in cash / $465M Q net loss = LESS THAN 2 QUARTERS LEFT. Revisit this before investing (it looks like their FCF is larger than previous net losses, so the cash burn rate could change markedly)
* strange numbers
* major vulnerabilities: big competitors who can bundle Dropbox out of existence
* OK for Sine Wave investing, but with low expectation. Not very volatile, relatively speaking, and swings narrowing. Expect less than a 10 percent return and mitigate risk by making small investment.