Analyst Note| Brian Colello, CPA |
No-moat Dropbox kicked off fiscal 2021 with financial results that were largely in line with our expectations. Dropbox continued to execute well against its three-pronged strategy of evolving existing products, developing new ones, and expanding its operating margins. The firm seeks to leverage its existing offerings and recent acquisitions, such as DocSend and HelloSign, to drive user retention and customer conversion. While Dropbox's aim to create a family of online collaboration tools is ambitious, we remain unconvinced of the firm's ability to differentiate itself in the long run or create a sustainable competitive advantage. We are maintaining our $19 fair value estimate for no-moat Dropbox. With shares trading around $25, we recommend investors wait for a pullback before committing new capital to the name.