What to Do With Dropbox Stock After Earnings

Dropbox increases revenue and total paying users, but the stock is still lower

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Data storage giant Dropbox, Inc. (NASDAQ:DBX) announced its fourth-quarter earnings yesterday after the close, and the results were outstanding. The company reported $504.1 million in total revenue for the fourth quarter, signaling 13% growth year-over-year. Dropbox also generated $1.91 billion in revenue for the fiscal year of 2020, representing a 15% increase year-over-year. In its press release DBX highlighted significant growth in the total number of paying users. Dropbox had 15.48 million paying users at the end of the year compared to 14.31 million during the same period last year. Additionally, this past year the average revenue per paying user of DBX was $128.50, compared to $123.07 in the prior fiscal year. For the fourth quarter of 2020, the average revenue per paying user was $130.17, compared to $125.00 for the same time period last year.

Other key takeaways from the financial report included Dropbox's $1.121 billion in cash, cash equivalents and short-term investments; as well as the authorization of a $1 billion stock repurchase plan. On the earnings front, Dropbox ended the year with a total earnings per share (EPS) of $0.93, marking 85% growth from the $0.50 it reported the prior year. Even further, DBX reported $0.28 in fourth-quarter earnings, beating analyst expectations by $0.04. Dropbox also maintained its record of beating earnings throughout all four quarters of 2020.

Dropbox stock scored a 1.2% gain yesterday, but is down 4.8% to trade at $23.47. Nonetheless, DBX is still up roughly 30% year-over-year, and isn’t too far off its Feb. 8 18-month high of $25.70. The good news is the shares' pullback today has so far been met by their 50-day moving average, a trendline that contained a pullback earlier in 2021.

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One word of caution for prospective options traders though. Dropbox stock currently ranks an incredibly low on the Schaeffer's Volatility Scorecard (SVS), with a score of 2 out of 100. This scorecard is used to identify which underlying stock options have historically had underpriced or overpriced options. Low SVS readings indicate consistently realized lower volatility than its options have priced in -- pointing to DBX being a potential premium-selling candidate, rather than a premium-buying candidate.

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