Dropbox -- Quietly pivoting from shared storage to ecosystem.
I’ve decided to go long Dropbox.
To see my research process and analysis…feel free to view my pre-investment sheet in the link below…created with Dropbox Paper of course:
I’ll keep the article short and to the point. The market is looking at Dropbox like a file storage play. It’s not just that anymore. It started it’s pivot about a year ago, it just hasn’t done a good job of telling the whole world. However it looks like this is starting to change. A recent win over Google and Microsoft at the University of Michigan is a testament to the power of it’s platform.
That being said, it is still a work in progress. Here are some of the things which I think can drive growth and usage:
HelloSign
HelloSign may prove to be one of the best acquisitions in recent memory of any company. For $230M Dropbox scooped up a DocuSign competitor. At the time DocuSign was a $10B public company. It’s now worth 4x that. How much is HelloSign worth in a platform with 600M users? I’d say Dropbox will more than make $230M off the HelloSign transaction. They announced in an earnings call that they’ve used data science to identify potential Dropbox users who could benefit from HelloSign and that they’ve had success in converting them to HelloSign.
Dropbox Desktop App
For a great walkthrough of what can be done with the app, see the following link:
The ability to have all of your files, projects, important web links, communication tools, to-do lists, timelines in one single desktop app is a huge deal. As the digital world becomes more and more fragmented, users are wanting a one stop solution. We’ve seen it in so many other aspects of life. Think about why people shop at Amazon. Why they order food from Door Dash. Why people use Roku. People want ways to simplify their lives. Dropbox is trying to do that for work life. It’s a big task, but they are making progress. The fact that they dedicate nearly 40% of revenues to R and D means they should continue to make improvements. The Dropbox Community Idea box is full of good improvements, and Dropbox has implemented some of the most requested features.
Dropbox Paper
Dropbox Paper is a promising project visualization tool. Just to get an idea of what’s possible with Paper see this video:
Collaborative white space tools are growing in popularity. The ability to have collaborative visualization tools, file storage and sharing, communication in app and e-signature tools is a pretty promising value proposition. Paper is simple to start with, but has a number of features.
Valuation
As noted in my research, Dropbox is not trading at premium right now. It actually looks quite cheap. The market is pricing it as a file storage platform. The reality is that it’s starting to develop into an ecosystem. The platform itself has value. A company like Adobe would likely love to bolt Dropbox on. This gives a low risk, but high potential reward for an investment in Dropbox. These are my favorite types of investments. Thus I’ve opened a position in Dropbox. I think it’s early innings for their larger plans.