![]() More and more freelancers have emerged from the pandemic, untethering themselves from a corporate lifestyle and building brands and businesses of their own. Note that in FY21, Dropbox already hit north of $700 million in free cash flow, so I think it's highly likely that this original $1 billion target gets replaced with something more aggressive. The fact that Dropbox has routinely dangled a target of hitting $1 billion in annual FCF by FY24 while continuously raising operating margins quarter after quarter is a big draw for investors. Growth and paying premiums for growth stocks are out value is in. Dropbox isn't just trading on a pie-in-the-sky future projection, but on real free cash flow today, singling out from other SaaS stocks in this risk-averse environment.I remain bullish here and am confidently retaining this stock in my portfolio.Īs a reminder for investors who are newer to this name, here is my full long-term bull case for Dropbox: Despite its cheapness, Dropbox is operating close to the "Rule of 40". But at the same time, the company has become a powerful recurring-revenue story operating at a 30%+ pro forma operating margin. Yes, Dropbox is no longer growing as quickly as in the past (but then again, even during the pandemic, revenue growth only held to the mid-teens). Here, understanding the bottom-line story is key. It's a great time, in my view, for investors to reassess the bull case for this name. One of the rare decliners in a robust tech recovery this year, Dropbox stock is down ~10% year to date. The file-sharing software company has been stuck in bearish doldrums so far this year, with losses accelerating after the company's mid-February earnings update. It's a good time to focus on valuations again: if the current recession stretches out, steady businesses that are trading at below-fair prices should win out in the end.ĭropbox ( NASDAQ: DBX) is an excellent investment choice with that in mind. Right now, with the stability of banks in question and markets returning to extreme volatility, a lot of investors are shifting into safer plays after this year's risk-taking aptitude has pulled back somewhat.
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