Undervalued Value Stocks: Dropbox
Dropbox is a file hosting service company. Its stocks lost 33% for their peak prices. Investors were lacking excitement over this stock during the recent mini-rally as the company presented quite moderate revenue growth in Q1 2023 as the firm has become a value company. Even the AI-driven segment is unlikely to dramatically boost the company’s revenues . Key drivers for the stock could be rather found in the stable continuous income and higher margins. The company has decided to lay off 16% of its staff so this may help to improve margins. It is also a signal from the management that it will continue to raise margins and the company’s effectiveness.
The company’s management is expecting to increase Free Cash Flow (FCF) to $1 billion in 2024. Why is this so important? The company, unlike many other tech firms, has already found its source of stable income and is trying to increase it. Investors themselves are not prone to overpay for risky growth stocks at the moment, and are seeking out value stocks that could bring them stable income. Dropbox is expecting revenues at $2.470-2.485 billion and FCF at $820-840 million in 2023 with an operational margin at 33-34%.
Management has spent $570 million during Q1 2023 to buy back 8% of the company’s stocks. If it succeeds to receive FCF as planned, its stocks may easily recover losses and continue to gain momentum.
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