Meanwhile, Dropbox has guided to $2.095-$2.115 billion in revenue next year - which would put Dropbox's current valuation at just 4.1x EV/FY21 revenue. At current share prices near $22, Dropbox trades at a market cap of just $9.35 billion (less than the "decacorn" valuation that Dropbox enjoyed as a private VC-backed company), and after we net off the $1.12 billion of cash on its balance sheet, Dropbox's enterprise value is just $8.23 billion. The chief appeal to Dropbox is its ultra-modest valuation. Though no longer as exciting of a company as it was during its IPO (where it opened for trading at $29/share in 2018, and has fallen steadily since), I think Dropbox's steady subscription business plus its recent trend of dramatic margin gains will continue to find more favor among investors. Year to date, the stock is flat over the past twelve months, the stock is up only ~10%. Gains in Dropbox have trailed behind peer software companies over the past years.
The popular file-sharing company may no longer be growing as quickly as it has in the past, but it has cemented the strength of its recurring revenue base, is continually rolling out new features and strengthening its platform, which is the leading paid consumer service for file storage.
In that regard, Dropbox ( NASDAQ: DBX) fits the bill perfectly, and it's a stock that I have doubled down on as valuations come more into focus. Last week's rout in tech stocks showcases the importance of rotating toward more value-oriented stocks that are less susceptible to a broader market downturn.
These days, as the market's enthusiasm toward highly-valued tech stocks continues to wane due to stretched valuations and rising rates, finding good deals in the software sector has been harder and harder to find.
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