Dropbox plummets after reporting disappointing user growth (DBX)

Reuters/ Mike Blake

Dropbox reported second-quarter earnings Thursday fell short of analyst expectations for revenue per user.
Shares fell as much as 14% on the report.
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Dropbox is up against negative sentiment about its potential for growth.

Shares of the company fell as much as 14% on Friday fell after a disappointing second-quarter earnings release on Thursday.

The company stumbled when it came to average revenue per user, a key measure for the company’s growth. In the second quarter, average revenue per user was $120.48, compared to $116.66 for the same period last year. That was also less than what the company reported last quarter.

Dropbox did beat analyst expectations for revenue, reporting $42 million in the quarter, earnings-per-share of $0.10 where analysts expected $0.09. On the year, revenue also increased 18% — the company reported revenue of $401.5 million, exceeding analyst expectations of $401 million.

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"We continue to balance growth and profitability while delivering product updates our users find valuable. We’re making great progress on our mission of designing a more enlightened way of working and are excited about the remainder of 2019 and beyond," said Dropbox CEO Drew Houston in a press release.

On the earnings call with analysts Thursday, the company also raised its revenue guidance for the full year 2019 to a range between $1.646 billion to $1.648 billion. The company had previously said it expected revenue to be $1.634 billion.

Even as shares fell, many analysts that cover the stock remained positive in their outlooks. The company has 11 buy ratings, three hold ratings, and two sell ratings from analysts, according to Bloomberg data. The average price target for Dropbox is $29.64, about 56% more than where shares are currently trading.

Still, bears point out that Dropbox faces an uphill battle. Analysts at Bernstein initiated coverage of shares of Dropbox with an underperform rating, citing "headwinds" that the company faces from major competitors in file sharing and storage.

Shares of Dropbox are down roughly 9% year-to-date.

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