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Bull Of The Day: Dropbox (DBX)

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Dropbox (DBX - Free Report) is a more recent IPO, but has a solid Zacks Rank #2 (Buy) which tells me the estimates are moving higher.  We saw this stock spike not to long ago, so with the recent pull back, now is the perfect time to look at why this stock is a Zacks Rank #2 (Buy) and how it became the Bull Of The Day.

Description

Dropbox, Inc. is a service company. It offers a platform which enables users to store and share files, photos, videos, songs and spreadsheets. Dropbox, Inc. is headquartered in San Francisco, California.

Recent IPO

DBX made is debut on the public markets on March 19 of this year.  The deal was a hot one as the investment bankers moved the indicated range from $16-$18 to $18-$20 - a signal of strong institutional demand.  The deal priced at $21 - above the upwardly revised indicated range and then opened for trading at $29.

What a ride that day way... but more recently there was an even bigger swing higher.

Recent Earnings

On May 10 the company reported its first quarter as a public entity and beat the estimate.  The company had 8 cents per share in earnings when the consensus was calling for 5 cents.  Revenues of $316M were ahead of the $309M estimate as well.

On the conference call, the company then guided higher for next quarter and the full year for revenues.

That made the first quarter a beat and raise.  Just what you want to see out of the gate.

Analysts

With the report and call in the rearview mirror, Canaccord Genuity raised their target to $36 for the stock and told clients to "buy aggressively" noting that they had "zero hesitation" to recommend the purchase of shares.

Estimates

The Zacks Rank is based on the movement of earnings estimates.  When analysts move estimates higher, the Rank moves up.  If estimates are cut then the Rank moves lower.

Following the earnings release and the guide higher, estimates moved higher.

In fact, the estimate for the current quarter DOUBLED from $0.03 to $0.06.

We also saw the estimate the next quarter move from $0.05 to $0.07.

Importantly, the Zacks Rank puts more weight on the annual numbers as quarterly estimates tend to move around a lot more.  

The 2018 Zacks Consensus Estimate moved from $0.19 to $0.28 - a huge move.  What is more that idea carried forward to next year as well.  

The 2019 Zacks Consensus Estimate moved from $0.30 to $0.40.

These big moves higher in earnings estimates are what drove the stock to surge up in recent weeks.

Chart

 

Dropbox, Inc. Price and Consensus

Dropbox, Inc. Price and Consensus | Dropbox, Inc. Quote

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