Share This Article

Facebook LinkedIn
Twitter Reddit
Print Email
Pinterest Gmail
Yahoo
Money Morning
×
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • Angel Investing
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
  • Retire
    • Income Investing Guide
    • Retirement Articles
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
Login My Member Benefits Archives Research Your Team About Us FAQ
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • Angel Investing
    ×
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
    ×
  • Retire
    • Income Investing Guide
    • Retirement Articles
    ×
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
    ×
  • Subscribe
Enter stock ticker or keyword
×
Join 100,000+ Like-Minded Investors Today
Twitter
Tags: Stocks
Stocks: CLDR, DBX, DOCU

Why DropBox Stock Is Now Turning into a Buying Opportunity

By Money Morning Staff Reports, Money Morning • June 9, 2021

Start the conversation

Comment on This Story Click here to cancel reply.

Or to contact Money Morning Customer Service, click here.

Your email address will not be published. Required fields are marked *

Some HTML is OK

It took fearless activist Elliott Management to get investors interested, but DropBox stock is finally attracting some positive attention from investors.

And that puts the stock square on our buying radar.

Although the 13D has not been filed with the SEC yet, there has been talk in the press that Elliott Management is now the largest outside shareholder of Dropbox Inc. (NASDAQ: DBX). That would mean his stake is more than the $838 million position owned by Blackrock Inc. (NYSE: BLK).

It is an interesting move by the hedge fund led by Paul Singer. The two largest shareholders are CEO Andrew Houston, who owns 29%, and Sequoia, the venture capital fund, which owns 13%.

That's a voting block of over 41%, so a proxy fight would probably be over before it began.

However, we are talking about a man who once seized a naval vessel owned by Argentina as part of a struggle over that nation's defaulted debt.

Singer won.

Taking a more than 10% stake in a cloud storage company and taking on the founder/CEO and one of the more successful Venture Capital funds in the United States is not that daunting a task after that.

So what plans do they have in store for DropBox? And does that mean now is a good time to buy DropBox stock?

We'll show you everything you need to know...

Why DropBox Hasn't Risen to the Moment

Looking at DropBox, it's easy to see what Singer and his team at Elliott see in the company. Dropbox went public back in 2018 and has traded below its IPO price for most of the time since.

Sign up for SMS so you never miss special events, exclusive offers, and weekly bonus trades.

DropBox offers a place for people to digitally store documents and photos. It has a product that allows people to share documents and work on them together. It also has DocSend and a program that makes digital signatures easier to use.

Business should be booming during this work-from-home era, but it's underwhelmed.

Sorry; this signup opportunity has ended.

It has done a pretty good job of getting people to sign up for the free storage services it offers. It has not done such a great job at converting those people to paid users of the products.

The other problem that it has is that large competitors like Alphabet Inc. (NASDAQ: GOOGL) and Microsoft Corp. (NASDAQ: MSFT) are getting their act together when it comes to cloud storage. The problem for Dropbox is the business is a rounding error for the computing giants, and they can turn the type of cloud products that DropBox offers into commodity products.

They need to offer the services, but they don't need huge margins for them.

DropBox also has not done a great job of penetrating the enterprise markets. Business customers have a much higher value than individual accounts, and DropBox is just not gaining share in that marketplace.

Some are hoping that the recent acquisition of DocSend will be the company's ticket into the enterprise market. DocSend offers an end-to-end suite of secure, self-serve products for content collaboration, sharing, and e-signature.

We found out in the pandemic that using and transmitting documents and signatures was a much easier and more cost-effective way of doing business than jumping on a plane, spending the night in the Hyatt, and flying back late in the day.

That helped send shares of rival Docusign Inc. (NASDAQ: DOCU) skyrocketing over 200% higher since the start of 2020.

Why This Makes DropBox Stock a Good Buy

It will be interesting to see what, if anything, Elliott reveals in its 13D filing. That should be due at the SEC by the end of the week.

Given the amount of M&A activity we have seen in the space recently, I am not going to be surprised to see Elliott push for a sale of the company. Recently, private equity firms have been busy in the cloud computing space, with KKR Dubilier & Rice announcing a deal to buy Cloudera Inc. (NASDAQ: CLDR) recently.

Shares of DropBox are trading at 5.2 times sales, which sounds high until you realize that other cloud-based companies trade for several times the level of DropBox.

DropBox is valued at less than 20 times forward earnings, which is well below what other cloud-based companies are fetching today.

This will be an interesting battle between a strong founder and venture capital backers and a fearless activist with deep pockets.

The activist might call for increased buybacks on top of the $1 billion buyback plan announced earlier this year instead of a sale.

With Singer, we have learned not to be surprised by anything he does in an activist situation.

We think that whatever happens should be good for the stock price.

DropBox is an undervalued software company that is finally gaining momentum thanks to an activist filing.

This combination could work out very well for investors and traders alike.

Is This the Retirement Catch-Up Americans Have Been Looking For?

Have you seen this new extra income hack yet?

Everyday Americans have been making 100%, 200%, 500%, or more... sometimes in a matter of days with this one new strategy.

Some of them are retiring from their jobs because of it. Others have paid off all their debt and bought their dream homes.

You can see their stories for yourself right here.

Follow Money Morning on Facebook and Twitter.

Join the conversation. Click here to jump to comments…

Login
guest
guest
0 Comments
Inline Feedbacks
View all comments


Latest News

June 6, 2023 • By Garrett Baldwin

Postcards: These Four Stocks Are Showing Real Momentum

June 6, 2023 • By Alex Kagin

Apple’s New Headset Drops, Crypto Melts Down, and Another Economic Indicator Bites the Dust

June 5, 2023 • By Nick Black

This Tech Stock is Poised for Pick and Shovel Profits from the AI Revolution  
Trending Stories
ABOUT MONEY MORNING

Money Morning gives you access to a team of market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

QUICK LINKS
About Us COVID-19 Announcements How Money Morning Works FAQs Contact Us Search Article Archive Forgot Username/Password Archives Profit Academy Research Your Team Videos Text Messaging Terms of Use
FREE NEWSLETTERS
Total Wealth Research Power Profit Trades Profit Takeover Penny Hawk Trading Today Midday Momentum Pump Up the Close
PREMIUM SERVICES
Money Map Press Home Money Map Report Fast Fortune Club Weekly Cash Clock Night Trader Microcurrency Trader Hyperdrive Portfolio Rocket Wealth Initiative Extreme Profit Hunters Profit Revolution Quantum Data Profits Live Trading Alliance Trade The Close Inside Money Trader Expiration Trader Flashpoint Trader Darknet Hyper Momentum Trader Alpha Accelerators Weekly Profit Cycles Brutus Alerts Resource Traders Alliance

© 2023 Money Morning All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning.

Address: 1125 N Charles St. | Baltimore, MD, 21201 | USA | Phone: 888.384.8339 | Disclaimer | Sitemap | Privacy Policy | Whitelist Us | Do Not Sell or Share My Personal Information

wpDiscuz