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Is Cloud Stock Dropbox (DBX) a Buy in the Coronavirus Economy?

Benjamin Rains

Dropbox DBX stock popped Thursday, alongside the Dow, the S&P 500, and the Nasdaq, after all three major U.S. indexes posted their first back-to-back gains in a month on Wednesday. The positivity comes on the hopes that the $2 trillion stimulus package, alongside the Fed’s efforts will help the U.S. economy fight back against the coronavirus.

Dropbox is a cloud storage firm that helps create digital collaboration and has boosted its enterprise-level offerings. The firm boasts over 600 million global users and its fiscal 2019 revenue jumped 19%. “Our strong Q4 marked the end of an exciting year for Dropbox as we launched our vision for the smart workspace,” Dropbox CEO Drew Houston said in prepared remarks on February 20.

“We closed the year with more than $1.6 billion in revenue, over 450,000 Dropbox business teams, and millions of people using our new foreground app that keeps Dropbox at the center of our users' workflows.”

Dropbox stock has jumped over 16% in the last two weeks and could benefit from its work-remote capabilities and appeal, alongside Zoom Video ZM, Netflix NFLX, and other stocks that seem fit for our current coronavirus economy.

DBX’s earnings revisions remain largely positive. Plus, Dropbox is trading at 3.9X forward 12-month Zacks sales estimates. This marks a discount compared to its highly-ranked industry’s 5.4X average and its own one-year median of 4.5X.

Our Zacks estimates call for DBX’s adjusted earnings to jump 42% in fiscal 2020 to reach $0.71 per share, with its 2021 EPS figure set to climb another 24% higher. Meanwhile, Dropbox’s revenue is projected to pop 14% and 11%, respectively during this stretch to reach $2.10 billion in 2021.

Dropbox is currently a Zacks Rank #1 (Strong Buy) that rocks an “A” grade for Growth in our Style Scores system. And DBX is trading at under $19 a share despite its recent climb, which puts it nearly 30% off its 52-week highs. Clearly, it is too early to call a bottom, given the broad uncertainty, but some might want to consider taking a nibble at Dropbox.

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