With its enterprise value that represents less than nine times management's forecasted free cash flow of at least $1 billion in 2024, Dropbox (NASDAQ: DBX) looks like a cheap software-as-a-service (SaaS) growth stock. In addition, its first-quarter results indicate the impact of the coronavirus pandemic seems limited, as full-year guidance stays valid (with minor currency and interest rate adjustments).
However, investors should remain prudent: The company is transitioning away from its legacy, now commoditized, core business; and management's long-term goals exclude some important costs.
Dropbox's legacy activity consists of providing storage for users to host their files in the cloud and access them from anywhere. But that business is being commoditized as giant competitors offer such services for free or at low cost. For instance, Alphabet's Google Drive provides 15 GB of free data storage, and Google One's offerings start at 100 GB of storage for $1.99 per month.
Source Fool.com