Dropbox (NASDAQ:DBX) is one of the worst-performing post-IPO technology stocks. In May, the stock failed to break out above the $24 range. The downtrend is firmly in place after the stock fell ~5% on Nov. 6 following mixed quarterly results.
Dropbox posted revenue growing 14% to $487.4 million. GAAP operating income more than doubled, up 261% (up 100% Y/Y on a non-GAAP basis). Hellosign, which has similarities to DocuSign’s offering, is a potential growth catalyst. But investors need to wait patiently before the e-signing solution pays off. Dropbox needs to upsell this to its existing customers before gross margins expand.
Dropbox highlighted the addition of around 300,000 paying users and growing ARPU. Users appreciate the new offerings that have two objectives. First, paid users to get tools that help keep them better organized. Second, customer retention and conversion increase as engagement increases, and churn rates decline.
Investors may appreciate that DBX stock did not dilute by much in two years. So, if HelloSign grows and Dropbox adds users from its partnership with Adobe and Dropbox Transfer for Adobe Creative Cloud, the stock will eventually find a bottom.
Takeaway
Dropbox stock will continue facing selling pressure after peaking at ~$23.50 in the summer. Wait for the downtrend to end before considering an initial position.