What Happened:
Shares of cloud storage and e-signature company Dropbox (Nasdaq: DBX) jumped 7.3% in the after-market session after the company reported first-quarter results that beat analysts' estimates for revenue, gross margin, free cash flow, and earnings per share. However, there was a slowdown in customer growth. While the company lowered revenue guidance for the full year, EBIT guidance was raised. The profitability outlook is promising, considering the initiatives implemented earlier in the year to streamline the workforce and generate significant cost savings. Overall, the market is generally cheering a focus on operating leverage and free cash flow for software companies, a different tone than the 'growth at all costs' mindset of previous years.
What is the market telling us:
Dropbox's shares are not very volatile than the market average and over the last year have had only 7 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was 8 days ago, when the company gained 6.51% on the news that the company said it expects to meet or exceed its revenue, constant currency revenue, and non-GAAP operating margin guidance for the first quarter of 2023, which it had given on February 16, 2023. The company also announced plans to cut its global workforce by about 16% and expects to take charges of $37 million to $42 million related to the job cuts. Most of the charges are expected to be recorded in the second quarter of 2023 and almost all of these will be completed by the end of 2023.
Dropbox is down 5.86% since the beginning of the year, and at $21.25 per share it is trading 14.5% below its 52-week high of $24.84 from August 2022. Investors who bought $1,000 worth of Dropbox's shares 5 years ago would now be looking at an investment worth $725.94.
Is now the time to buy Dropbox? Access our full analysis of the earnings results here, it's free.