Bulls and Bears and Tech IPO's, oh my! Seems like there is always another one right around the corner. Let's talk Dropbox my friends!
Dropbox made it's debut on the NYSE only 18 days ago (as of March 23, 2018). It priced it's IPO at $21 a share, up from the $16-$18 anticipated IPO price. I will definitely be keeping my eye on this one because the service it provides is too easily replicated by larger competition, which doesn't give me enough wow factor to be interested in holding this long term. Quick day trades or short term swing trades, maybe.
With giants like Apple, Google, and Microsoft as competitors it’s hard to see how Dropbox will pull ahead and differentiate itself. That being said, Dropbox does report to have over 500 million users worldwide, 11 million being paid users, as well as 300,000 paid business accounts which is nothing to scoff at!
Much of the services are similar to a wide variety of other companies, such as storage, allowing you to send large documents to others or collaborate on projects over different devices. Many of Dropbox’s competitors offer more features under the “freemium model” which pulls potential Dropbox customers to larger, more all encompassing alternates. For instance, with similar products like Google Drive, alongside Google Docs, Sheets, etc, allof which intuitively sync with your devices, it seems unnecessary to go with another 3rd party unless you don’t use gmail and Google at all. Especially since, the price comparison between the two products are the same when you upgrade to a higher tier. Google also gives you 5 time more free space upfront. Microsoft OneDrive is also another great option especially when working between different operating systems. It offers Storage only tiers, as well as access to Microsoft office products for those who don't have Microsoft. I have personally used OneDrive to work on Excel and Powerpoint (for free) when preparing documents for clients who don't have a Mac, all through my browser.
Dropbox relies on its bottom up customer adoption strategy which for those of you who don’t know, is where you market to a wide audience of people at a low price and sell to a large number of those users. Much of this strategy uses “virality” as a way to generate new users. Think of it like a wildfire. It starts out small and spreads from user to user until they blanket a large group of people. In fact, the bottom up customer strategy is utilized by most tech companies and is considered by some the "new way to sell" in an internet centric world.
Let's take a look at Box, one of Dropbox's main competitors (surprise there) Box started in 2005 only 2 years before Dropbox in 2007. Despite Box being 2 years older, Dropbox has still managed to pull ahead in terms of size, growth, and various other fundamentals. While Box has 1700 employees, Dropbox has over 1800. Earlier this year Dropbox reported it's revenue at around 1.1 billion dollars, which makes it's 12.21B market cap a bit of a head scratcher and something that I think it is going to have to catch up with quickly on it's operations side. It's interesting as Box reported a total revenue of $506 million (50% of what Dropbox reported) however, still only boasts a market cap of 2.78B.
Box's IPO opened at $14 a share with a quick jump to almost $25 in the first day of trading. As expected, like most tech IPO's, a pullback occurred to it's lowest price of $9.00. And most recently it is back around what is was when it IPO'ed. From it's high of almost $25 down to $9, that's a decrease of around 64%. Box has only 41 million users compared to Dropbox's 500 million, so I don't expect such a drastic pull back for it, but I do expect that the chart will look similar, with less drama that is. Dropbox only opened $7 above the Box IPO price, but has so much more influence in the market.
All in all, time will tell for Dropbox. I personally won't be holding this in my longterm portfolio, however, short term trades are a different story.
In fact, here is a trade that Jerremy and the crew in the trading floors are looking to play for a quick in and out. Click here to see that.
I think Dropbox has enough buzz to move this stock up, down and sideways giving us traders an opportunity to score some cash-ola. However, that's all I see exciting on Dropbox and this IPO reminds me of two day old cornbread.
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