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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.