Investment Research report

Dropbox, Inc.

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Dropbox, Inc.
A Box of Empty Promises
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Research Overview

S&P 500
Feb 6, 2020

After conducting a forensic financial and accounting review, Spruce Point believes Dropbox, Inc. (NASDAQ: DBX), a file hosting software service, is a decelerating business in an increasingly low value-added space, with little network effects or barriers to entry, new normal of accelerated churn, increased capex, and rising customer acquisition costs will come to bear on results as soon as the next few quarters. Based on our investigation, we estimate 25% to 60% downside, or $6.60 - $13.00 per share.

The report highlights several key concerns with the company, including:

  • We find commoditization of Dropbox’s core offering as a result of free alternatives
  • We believe that customers may rebel as a result of price increases for new features
  • Data shows that cash flow is potentially misunderstood by a significant margin
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