So far earnings have been a rocky road. On the one hand, you have Microsoft, Netflix and Tesla smashing estimates, while on the other Alphabet and Amazon pulled back following more mixed results. Amazon, for example, implied that its fourth-quarter profit could be far lower than Wall Street was predicting. Meanwhile, growth in Google’s ad business slowed 2 percentage points more than expected at 21% vs 23%.
Let’s take a closer look now at the following three stocks:
1. Dropbox
Dropbox (DBX – Research Report) is out with its third quarter results on November 8. For the quarter the Street is looking for revenue of $353M and Non-GAAP EBIT of $29M.
In his earnings preview, top RBC Capital analyst Mark Mahaney (Track Record & Ratings) highlights the file-sharing service as one of his favorite stock picks right now.
“We’re most incrementally near -term constructive on DBX – which has traded down 21% intra-quarter, but we believe has reasonably conservative Street estimates, in part based on probable ARPU [average revenue per user] trends” the analyst wrote in an investor report on October 9.
He reiterated his DBX Buy rating with a $36 price target. From current levels that indicates substantial upside potential of over 58 percent.
According to Mahaney, investors shouldn’t be fazed by Dropbox’s 10 percent trade off on last quarter’s results. “We did not read much into the COO’s departure, and viewed the lack of material Op Income raise as conservatism more than anything” he explained.
Instead, investors should focus on the company’s “best of breed FCF margins coupled with robust, consistent revenue growth. Internet Scalability with SaaS Predictability!” Bottom line: “We continue to view Dropbox as addressing a large TAM and view it as one of the clear market leaders.”
In total, DBX scores a Strong Buy top analyst consensus. This is with 4 buy ratings and 1 hold rating in the last month. Meanwhile, the average analyst price target of $37 shares can surge 63 percent.
