2024-06-06 13:43:59 ET
Summary
- Dropbox's stock has dropped over 20% this year, with slowing growth and disappointing Q1 results.
- The company cited conversion issues at the top of its funnel, stemming from its decision to focus on middle-priced SKU tiers.
- Q1 revenue growth not only decelerated sharply and declined sequentially from Q4, but also lagged several points behind rival Box's growth rate.
- The only positive offsets for Dropbox are a rich operating margin (~37%) and a cheap FCF multiple, but growth issues will likely keep the stock from re-rating to a normalized multiple.
Left and right, software companies are citing both tighter IT budgets as well as a slowdown in headcount expansion as key headwinds to growth. Companies that used to tout their ability to sustain double-digit growth are now backing down from those hopes - and those that struggled to notch impressive growth rates prior to this macro slowdown are having an even more difficult time, such as Dropbox, Inc. ( DBX )....
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Dropbox: The Growth Engine Has Sputtered (Rating Downgrade)