Dropbox (NASDAQ:DBX) was raised to Neutral from Sell by Goldman Sachs analysts, who also raised the firm's price target on the stock to $25 from $22 per share in a note Monday.
The analysts' upgrade follows the company's recent results. They told investors in a note that Dropbox's full-year guide is attainable, and the company has a healthy margin profile that is overlooked at current levels.
Dropbox's earning results "beat across all metrics (with revenue coming in 2% higher than consensus, ARPU beating by 1%, operating margin by 5%, and EPS by 15%) and de-risked the guide for the rest of the year by leaving it unchanged (on a CC basis)," the analysts wrote.
"We move to the sidelines given: 1) the attainability of the implied FY growth, which assumes CY23 net new revenue down 6%, despite coming off a -32% decline in FY22 and having a lift from the FormSwift acquisition, 2) strong operating profitability, with ~30% margins, that should tick higher after restructuring efforts announced last week, and 3) a discounted valuation at 3.3x C24 sales vs peers' 4.8x," they explained.
In addition, the analysts noted that DBX is reallocating resources towards AI, and they see the company as "favorably positioned to introduce such functionality, given its lead as a category leader within content collaboration and the magnitude of data already on the platform."