Bullish indicating open at $55-$60, IPO prices at $37
Investing.com - Jefferies raised its price target on Dropbox (NASDAQ:DBX) to $30.00 from $28.00 on Monday, while maintaining a Hold rating on the cloud storage company. According to InvestingPro analysis, Dropbox appears undervalued at its current trading price of $26.91, with multiple analysts recently revising earnings estimates upward.
The price target increase follows Dropbox’s stronger-than-expected operating expense control, with operating profit approximately 10% ahead of expectations. The company achieved an operating margin of 41.5%, significantly exceeding its guidance of 37.5%, primarily driven by headcount reductions and lower marketing spend. InvestingPro data reveals an impressive gross profit margin of 81.45%, highlighting the company’s operational efficiency. Get access to 8 more exclusive ProTips and comprehensive financial metrics with InvestingPro.
Dropbox has upgraded its fiscal year 2025 operating margin forecast to approximately 39%, a 70 basis point increase from its previous guidance range of 38-38.5%. The company also demonstrated solid cash flow performance with free cash flow 14% above expectations, representing a 15% year-over-year increase.
The cloud storage provider maintained a consistent share repurchase program, buying back $410 million worth of shares this quarter, following approximately $500 million in the previous quarter. These buybacks have led to a roughly 15% reduction in diluted share count year-over-year, primarily driving the approximately 18% earnings per share growth. This aggressive buyback strategy has resulted in a high shareholder yield, as confirmed by InvestingPro’s analysis, with the company generating a strong free cash flow yield of 12%.
Jefferies noted areas to monitor include traction for Dropbox’s Dash product and its growth contribution, as the company continues to reallocate sales and marketing resources to support Dash momentum, though the timeline for Dash to be accretive to growth remains unclear.
In other recent news, Dropbox Inc. reported its second-quarter earnings for 2025, exceeding analyst expectations. The company achieved an earnings per share (EPS) of $0.71, surpassing the forecasted $0.62. Additionally, Dropbox’s revenue reached $626 million, which was above the anticipated $617.83 million. These results indicate that Dropbox performed better than analysts had projected. Despite the positive earnings and revenue figures, the company’s shares experienced a decline, reflecting investor concerns over future growth prospects and strategic adjustments. These developments highlight the mixed reactions from the market regarding Dropbox’s recent performance.
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