Dropbox Quiet Period Expires And Analysts Speak Up

The analyst quiet period on Dropbox Inc. DBX is over, and several sell-side firms initiated coverage of the newly public stock this week.

Here’s an overview of what Wall Street thinks of the cloud storage giant.

Voices From The Street

• D.A. Davidson analyst Rishi Jaluria said Dropbox’s differentiated strategy, rapid revenue growth and margin expansion potential make the stock a solid bet for long-term investors. “Now that Dropbox is publicly traded, we view the investment as less of a risk than buying shares pre-IPO,” Jaluria said.
• KeyBanc Capital Markets analyst Rob Owens said Dropbox holds a future opportunity to convert free subscribers to paid subscribers. “Currently serving 11 million paying users and 300,000 paid business accounts, Dropbox identifies [more than] 300 million ‘high-value’ targets in its  [over] 500 million free-user base, which is a promising conversion opportunity,” Owens said.
• Dropbox is one of the best-positioned cloud storage vendors, with the potential to expand its product into a collaborative platform, said Goldman Sach's Heather Bellini. “While our view is that Dropbox’s growth outlook is attractive, we believe that this is factored into the valuation at current levels,” the analyst said. 
• JMP analyst Greg McDowell said Dropbox has a massive total addressable market, demonstrated impressive revenue growth and a simple and effective self-serve “freemium” sales model with positive free cash flow. “Our $35 price target implies a 9.5x revenue multiple and a 41x adjusted FCF multiple — premiums to the subscription software peer group, which we believe Dropbox deserves based on its leadership position, virality and powerful network effects, scale, cash flow and long runway for growth." 
• Deutsche Bank analyst Amy Tan said investors who can stomach the risk shouldn’t hesitate to take a chance on Dropbox. “While hardly cheap, we conclude that Dropbox is sitting in front of a relatively untapped user base monetization opportunity, and we’re biased positive until we begin to feel that this opportunity has played out and/or is not as large as we currently think," Tan said.
• Dropbox has "blurred the line" between enterprise software and consumer internet models by penetrating a 500-million-user base through a "viral self-service model," said JPMorgan's Mark Murphy. The approach has allowed Dropbox to focus on R&D in order to drive adoption in a competitive market, the analyst said. 

Ratings And Targets

• D.A. Davidson has a Buy rating and $36 target.
• KeyBanc has an Overweight rating and $40 target.
• Goldman Sachs has a Neutral rating and $27 target.
• JMP has a Market Outperform rating and $35 target.
• Deutsche Bank has a Buy rating and $36 target.
• JPMorgan has an Overweight rating and $32 price target. 

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Photo courtesy of Dropbox.