As Dropbox aims for profit, it desperately needs a win

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Consumer and business file storage and sharing service Dropbox will announce first-quarter earnings tomorrow, and for a former unicorn, now a public company, the stakes seem pretty high.

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Dropbox ends year of growth stuck in adolescence with projected growth to prove even slower growth in 2022.

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The results, released Thursday by Dropbox, could support the company’s growth, improve its full-year guidance, boost its share price and reassure investors. Alternatively, the opposite is possible; If Dropbox reports earnings that disappoint investors, its stock price could drop even further.

The company reached a 52-week high of $33 per share. Shares are down more than 2% to $21.30 this morning but have risen from a 52-week low of $19.90. Dropbox has a market capitalization of just over $8 billion.

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This performance, with valuation falling, growth slowing and stock price stagnating, is the bait for takeover deals, meaning that Dropbox’s ability to pump money out of its operating business could help make it a tempting target for a hostile takeover.

The idea is not just theorizing; former Dropbox Box competitor recently confused with investors about their leadership and Zendesk performance put it in conflict with outside investors, forcing the customer support company reject a takeover bid.

With tech company valuations far from recent all-time highs, Dropbox could be the focus of private equity firms, and a poor earnings report could spark unwanted deals. Let’s talk about the company’s recent and expected results, how vulnerable it can be and, finally, who might want to buy it (if it comes to that).

Looking for sustainable growth

in fourth quarter 2021Dropbox reported $565.5 million in revenue, up 12.2% from last year. For the full year, Dropbox did even better, posting 12.7% growth to reach approximately $2.158 billion in annual revenue.

Fast growth? Solid? Certainly. But when Dropbox looked ahead in their recommendations during his final income statement As for 2021, the company’s expectations for this year were less encouraging. Dropbox expects $2.32 billion to $2.33 billion in total revenue in 2022, which equates to an increase of 7.51% to 7.97%, which is, frankly, not much.

Single-digit growth is not where any public company wants to linger unless it’s earning solid dividends and contenting itself with low costs. Dropbox is not that kind of company.

It’s worth noting that Dropbox’s Q1 guidance is between $557 million and $560 million. current analyst expectations, according to Yahoo Finance. At the same time, we wonder if investors would be thrilled if Dropbox reported $558.95 million in revenue.

What will be the outcome that will change the narrative for Dropbox? In our opinion, in order to get rid of the malaise, we need to reduce revenue in the first quarter and at least slightly expand the forecast for the year. Otherwise, we might try to start the countdown clock.

Can buyers start circling?

There are several places where Dropbox could find a new home. The most obvious is private equity – the sale of a company to a financial institution. Such deals tend to target slower-growing, cash-flow generating companies that can handle a heavy debt load and may have a chance to cut costs or even accelerate growth.

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