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Dropbox (DBX) Gearing Up For Q1 Earnings: What's in Store?

Zacks Equity Research
·4-min read

Dropbox DBX is set to report first-quarter 2020 results on May 7.

For the quarter, the company expects revenues between $452 million and $454 million. The Zacks Consensus Estimate for revenues is pegged at $451.8 million, which indicates growth of 17.2% from the year-ago quarter’s reported figure.

Moreover, the consensus mark for first-quarter earnings has remained unchanged at 14 cents per share over the past 30 days. This suggests growth of 40% from the figure reported in the year-ago quarter.

Notably, the company beat the Zacks Consensus Estimate in the last four quarters. It has a trailing four-quarter positive earnings surprise of 31%, on average.

Let’s see how things have shaped up prior to this announcement.

Dropbox, Inc. Price and EPS Surprise

 

Dropbox, Inc. Price and EPS Surprise
Dropbox, Inc. Price and EPS Surprise

Dropbox, Inc. price-eps-surprise | Dropbox, Inc. Quote

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Factors to Watch

Dropbox’s new desktop app is expected to have gained significant traction in the first quarter. The company’s efforts to enable users to access and synchronize files as well as utilize applications through multiple devices has been enhancing experience. This is likely to have led to incremental adoption amid surge in work-from-home trends due to the COVID-19 pandemic.

Moreover, a strong strategic focus on product innovation and introduction of new features like Dropbox Spaces, Paper and Extensions are anticipated to have boosted retention among existing users. This in turn is likely to have contributed to the company’s first-quarter performance.

The company also partnered with BetterCloud to integrate new features like custom security policies, scanning for sensitive data and automation of critical processes, which is expected to have driven momentum for the platform.

Increasing popularity of the Dropbox instill confidence in the stock. Notably, shares of the company have returned 11% in the year-to-date period against the industry’s decline of 1.2%.

Further, integration with leading applications like Zoom, Slack and Atlassian is expected to have expanded the paying user base, which reached 14.3 million in the fourth quarter.

However, increasing investments in product enhancements amid stiff competition from services like Microsoft One Drive, Google Drive and Citrix ShareFile are likely to have impeded margin expansion in the first quarter.

Product Enhancements in Q1

Dropbox introduced the Premium support and Dropbox Rewind features for Dropbox Business teams. Premium support comes with enhancements like faster email response, live training as well as improved phone and chat support. Dropbox Rewind will enable teams to roll back a folder or account 180 days or more in case of unforeseen disasters.

What Our Model Says

Our proven model doesn’t conclusively predict an earnings beat for Dropbox this time around According. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Dropbox has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some stocks you may consider as our proven model shows that these have the right mix of elements to beat estimates this time around.

Shopify SHOP has an Earnings ESP of +23.41% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Inphi Corporation IPHI has an Earnings ESP of +20.04% and a Zacks Rank of 2.  

Take Two Interactive TTWO has an Earnings ESP of +13.24% and a Zacks Rank #2.

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Take-Two Interactive Software, Inc. (TTWO) : Free Stock Analysis Report
 
Inphi Corporation (IPHI) : Free Stock Analysis Report
 
Shopify Inc. (SHOP) : Free Stock Analysis Report
 
Dropbox, Inc. (DBX) : Free Stock Analysis Report
 
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