Dropbox, Inc. Just Beat EPS By 40%: Here's What Analysts Think Will Happen Next

One of the biggest stories of last week was how Dropbox, Inc. (NASDAQ:DBX) shares plunged 23% in the week since its latest yearly results, closing yesterday at US$25.08. Revenues were US$2.5b, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$1.31, an impressive 40% ahead of estimates. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Dropbox

Taking into account the latest results, Dropbox's twelve analysts currently expect revenues in 2024 to be US$2.55b, approximately in line with the last 12 months. Statutory earnings per share are expected to tumble 25% to US$0.99 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.58b and earnings per share (EPS) of US$1.12 in 2024. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates.

It might be a surprise to learn that the consensus price target was broadly unchanged at US$30.30, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Dropbox at US$36.00 per share, while the most bearish prices it at US$24.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Dropbox shareholders.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Dropbox's revenue growth is expected to slow, with the forecast 1.9% annualised growth rate until the end of 2024 being well below the historical 11% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 13% per year. Factoring in the forecast slowdown in growth, it seems obvious that Dropbox is also expected to grow slower than other industry participants.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Dropbox. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Dropbox's revenue is expected to perform worse than the wider industry. The consensus price target held steady at US$30.30, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Dropbox going out to 2026, and you can see them free on our platform here..

However, before you get too enthused, we've discovered 3 warning signs for Dropbox (1 is a bit concerning!) that you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.