Investors across the marketplace are looking to Dropbox’s forthcoming IPO and salivating with anticipation, and for good reason; the aspiring data storage and compression company, which has hundreds of millions of users across the globe, stands to make huge waves in the market and will likely enjoy one of the most closely-watched IPOs of the year. With some impressive revenue figures likely to buoy its market debut, Dropbox is now expected to raise some $500 million with its IPO, which could see the 11-year-old-company establish itself as a permanent figure of respect in the tech scene.
Investors are curious about cloud storage
To understand Dropbox’s (NASDAQ: DBX) forthcoming IPO, you need to have a basic understanding of the future of cloud storage and how it’s likely to reshape the marketplace and society itself over the coming years. While most are already familiar with the basic idea of cloud storage thanks to the fact that it’s become a common feature of most of today’s leading digital gadgets, few investors who aren’t tech gurus understand how important cloud storage will be for the future of computing; as billions of digital devices are churned out in the immediate future, all the data they produce will need somewhere to go, and companies like Dropbox are who customers will turn to for directions.
Dropbox has already established itself as one of the leading behemoths in the field of data storage, and for good reason; few companies have been able to scale up operations like Dropbox has while remaining efficient and keeping hopes that they’ll one day be profitable. Like a plethora of today’s leading tech IPOs, Dropbox is unprofitable, and likely won’t be reaping in huge profits anytime soon; investors understand that when they back Dropbox they’re making a long-term investment, however, and most will be more concerned with the company’s revenue figures and userbase than they will be with its profits.
To that end, investors should realize that few companies enjoy the popularity Dropbox has come to rely upon; the company has more than 500 million total registered users, with 11 million paying subscribers who provide the bulk of its revenue. In 2017 alone, Dropbox enjoyed hefty revenue figures of $1.1 billion in sales, an impressive 31 percent increase from the year before. Investors are likely to keep an eye on that number, as Dropbox’s future profitability will largely be dependent upon its ability to scoop in more premium subscribers who pay for its service.
Filings made by the company that show it’s expecting some $500 million from its IPO have thus caused some investors to pause, and wonder if Dropbox is actually undervalued. Dropbox has many competitors in the cloud storage business, but few of them stand to reasonable threaten the company’s immediate future; the company was privately valued as being worth $10 billion a few years ago, and will likely continue to expand its services to the chagrin of competitors.
User growth looks good
At first glance, it’s challenging to determine Dropbox’s potential based on its userbase; overall user growth has been relatively stagnant, for instance, and the company hasn’t seen massive success in recruiting new consumers for its services. The share of its users who subscribe to Dropbox’s more valuable services, however, has steadily risen in recent years; Dropbox Business is the core of Dropbox’s operations, and it recently doubled its userbase from 150,000 to 300,000 in one year, for instance.
Thus, while overall user growth may not appear noteworthy at first, investors should consider the fact that Dropbox will likely become more popular with the business-minded professionals who drive much of the company’s revenue figures. While Dropbox will continue to face fierce competition from major tech players like Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOGL), who use skip to content features to power their servers and see many benefits in offering their own cloud storage services, it will likely continue to remain independent in the market and successful at expanding its footprint within the lucrative business community in the immediate future.
With 90 percent of Dropbox’s revenue being derived from those premium subscribers who pay for the company’s best services, it’s imperative for its future in the market that investors keep the pressure on executives to keeping luring in premium subscribers while retaining those they already have. Companies like Microsoft (NASDAQ:MSFT) and Box Inc (NYSE:BOX) will try to chip away at Dropbox’s userbase, and the company won’t ever become profitable if it doesn’t expand that 11 million-strong subscriber base that’s the only thing propelling it forward. While Dropbox has a history of posting losses, the company has shown seriously impressive growth in the past two years, and will likely enjoy more subscribers in the future; investors should keep their eye on the aspiring cloud storage company, as it may have one of the hottest and most-viewed IPOs of the year.