Analyst Targets 50% Upside for Dropbox Stock

Sentiment is bullish on DBX, despite the stock's recent record low

by Emma Duncan

Published on Oct 10, 2018 at 10:29 AM

Shares of Dropbox Inc (NASDAQ:DBX) are soaring in early trading, last seen up 3.3% at $23.51, after J.P. Morgan Securities added the cloud storage name to its Analyst Focus list. The firm said it sees up to 50% outperformance for DBX shares, following the company's successful September management meetings, and thinks Wall Street is "underestimating the stability and consistency of the Dropbox engine." As such, the analyst maintained an "overweight" rating and $35 price target on DBX.

Today's note is far from the only bullish attention Dropbox stock has received of late, as just last week the software name landed an upgrade and price-target hike at Instinet. Plus, 10 of 13 brokerage firms covering DBX sport "buy" or better ratings.

On the charts, however, Dropbox stock has struggled recently, having already shed 46% since its mid-June record peak, and just yesterday hitting an all-time low of $22.15. However, the stock still remains north of its March initial public offering (IPO) of $21, and is set to snap a five-day losing streak today -- its longest downturn since June. Heading into today, the equity's 14-day Relative Strength Index (RSI) sat at 25 -- in oversold territory, suggesting a short-term bounce may have been in the cards.

Regardless, short interest on DBX has fallen 24% during the past two reporting periods, but still accounts for a decent 18% of the stock's total available float. At the software stock's average daily trading volume, it would take short sellers about four days to buy back their bearish bets.

Meanwhile, now may be an attractive time to hop aboard Dropbox stock with options. This per the security's Schaeffer's Volatility Index (SVI) of 55%, which sits in the 23rd percentile of its eight-month range. In other words, muted volatility expectations are being priced into short-term contracts, and short-term options on DBX are priced to move.

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