In doing so, all these cloud players will benefit from cross-sells and upsell among them in the long run.
For instance, the Zoom ( ZM) and Slack ( WORK) deep integrations allow for Zoom conference calls and Slack conversations within the context of Dropbox contents. Through the new Dropbox desktop app, which marks its move beyond cloud storage, we expect these two factors to combine more cohesively and drive growth and expansions.Ī lot of the growth will be driven by the ecosystem approach, where deep partnerships with complementary cloud solutions allow for richer use case scenarios and user experience. In our view, central to the idea is its ecosystem-driven growth and efficient go-to-market strategies, which will be the near-term catalysts for the stock. Overall, we are pleased that Dropbox is choosing a profitable-minded growth path, which is a luxury for a lot of tech companies. Catalyst: ecosystem-driven growth and self-serve channelĪs we have learned in the most recent earnings call, Dropbox will continue to focus on delivering a double-digit growth that emphasizes margin expansion and cash flow generation in FY 2020. As Dropbox is going beyond cloud storage, we view the aforementioned items as two key near-term catalysts for the stock. The results tell us that Dropbox has established a pricing power, which we believe comes from its ecosystem-driven growth philosophy and efficient go-to-market. Gross margin also expanded by ~350 bps YoY to 76%, which was only 200 bps away from the lowest end of the long-term model of 78% - 80%. The company grew its revenue by 19% YoY while operating margins expanded by 500 bps YoY. Fast forward a few months, the company just posted a solid FY 2019 earnings report to prove us wrong.
As Microsoft OneDrive ( MSFT), Google Drive ( GOOG), and BOX ( BOX) gained traction in the cloud storage market, Dropbox’s pricing strategy back in Q2 last year created uncertainty on its competitiveness. We had underestimated Dropbox ( NASDAQ: DBX).
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