The global cloud storage market is booming due to the rapid growth of digital data and the need for scalable, secure solutions. Hybrid and multi-cloud strategies enhance flexibility and optimize data management, while advanced security features and edge computing further drive demand.
As enterprises expand their tech adoption, cloud storage becomes a promising investment opportunity. Therefore, promising tech services stocks Dropbox, Inc. (DBX) and Box, Inc. (BOX) could be wise investments now.
This year, cloud services are shaping the tech industry’s prospects by driving significant growth in the data storage market. Advances in SAN architectures, flash storage, and cloud integration enhance performance and appeal, fueling demand for advanced storage solutions across various sectors. The global cloud storage market is expected to reach $234.90 billion in 2028, expanding at a CAGR of 18.8%.
In addition, investors’ interest in tech stocks is evident from the Vanguard Information Technology Index Fund ETF’s (VGT) 27.1% returns over the past year.
Considering these conducive trends, let’s assess the fundamentals of the two Technology - Services picks, starting with the second choice.
Stock #2: Dropbox, Inc. (DBX)
DBX provides a content collaboration platform worldwide. The company’s platform allows individuals, families, teams, and organizations to collaborate and sign up for free through its website or app, as well as upgrade to a paid subscription plan for premium features.
In terms of the trailing-12-month EBIT margin, DBX’s 18.70% is 271.5% higher than the 5.03% industry average. Similarly, its 23.06% trailing-12-month net income margin is 550.3% higher than the industry average of 3.55%. Its 0.90x trailing-12-month asset turnover ratio is 44.8% higher than the industry average of 0.62x.
In the fiscal second quarter that ended June 30, 2024, DBX’s revenue stood at $634.50 million, up 1.9% year-over-year, and non-GAAP gross profit rose 4.1% year-over-year to $536.30 million. For the same quarter, its non-GAAP net income and net income per share increased 11.6% and 17.6% over the prior-year quarter to $194.10 million and $0.60, respectively.
Analysts expect DBX’s revenue for the quarter ending September 30, 2024, to increase marginally year-over-year to $637. 21 million. Its EPS for the quarter ending December 31, 2024, is expected to rise 4.8% year-over-year to $0.52. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past month, the stock has declined 3.5% to close the last trading session at $21.89.
DBX’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #10 out of 75 stocks in the Technology - Services industry. It has an A grade for Quality and a B for grade for Value. To access additional grades for DBX’s Growth, Momentum, Stability, and Sentiment, click here.
Stock #1: Box, Inc. (BOX)
BOX provides a cloud content management platform that enables organizations of various sizes to manage and share their content from anywhere on any device. It serves financial services, health care, government, and legal services industries internationally.
On August 8, 2024, BOX announced its acquisition of Alphamoon’s AI-powered document processing technology, enhancing its Intelligent Content Management platform. This acquisition boosts BOX’s capabilities in automating document tasks and extracting metadata, leveraging advanced OCR and large language models.
On August 6, 2024, BOX announced that its AI platform now offers unlimited queries for Enterprise Plus customers, with major Japanese firms like Asahi Group, The Norinchukin Bank, and Hitachi High-Tech deploying it company-wide. This move aims to enhance the management and utilization of unstructured data using generative AI.
In terms of the trailing-12-month Return on Total Capital, BOX’s 6.99% is 154.1% higher than the 2.75% industry average. Likewise, its 11.73% trailing-12-month Return on Total Assets is 424.1% higher than the industry average of 2.24%. Also, its 28.56% trailing-12-month levered FCF margin is 174% higher than the industry average of 10.42%.
BOX’s revenues for the first quarter ended April 30, 2024, increased 5.1% year-over-year to $264.66 million. Its non-GAAP gross profit increased 8.1% year-over-year to $212.18 million. The company’s non-GAAP operating income increased 22.7% year-over-year to $70.40 million.
Additionally, its non-GAAP attributable net income increased 22.9% year-over-year to $58.40 million. Its non-GAAP attributable net income per share increased 21.9% year-over-year to $0.39. Also, the company’s non-GAAP free cash flow came in at $123.24 million, representing an increase of 13.9% year-over-year.
Street expects BOX’s EPS and revenue for the quarter ended July 31, 2024, to increase 12.5% and 3% year-over-year to $0.41 and $269.20 million, respectively. BOX surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 7% to close the last trading session at $27.35.
BOX’s POWR Ratings reflect robust prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It is ranked #8 in the Technology – Services industry. It has an A grade for Growth and Quality and a B for Value. Click here to see BOX’s Momentum, Stability, and Sentiment ratings.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
DBX shares were trading at $22.56 per share on Tuesday afternoon, up $0.67 (+3.06%). Year-to-date, DBX has declined -23.47%, versus a 14.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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