Time to look at undervalued Dropbox – Barron's

This weekend’s issue of Barron’s is positive on Dropbox (NASDAQ:DBX), whose shares remain well below all-time highs even as investors have been piling into other work-from-home names.

The company, at ~$22/share, trades at just 4x enterprise value to estimated 2021 sales, while Zoom (NASDAQ:ZM) trades at 46x EV to sales, Slack (NYSE:WORK) goes for 18x and Atlassian (NASDAQ:TEAM) trades at 20x.

Dropbox, seeing an opening as workspace platforms battle for dominance, is striving to be a neutral player where anyone can converse, exchange content and collaborate, regardless of corporate origin or allegiance.

It is becoming an increasingly profitable business: Adjusted operating margins last year were 12%, while net income is forecast to rise 48% this year to $306M and 20% next year.

“They’ve shifted from a high-growth company to one that’s growing efficiently at scale, and more profitably than a lot of other companies,” says RBC analyst Alex Zukin, who rates Dropbox at Outperform and notes if the stock traded at just 6x EV to next year’s sales, it would be valued at $30, good for ~30% upside from current levels.


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