Dropbox Shares Drop

Shares of Dropbox, the cloud-based file storage service, saw its shares plunge 12.8% on Friday after reporting disappointing earnings data after the market closed on Thursday.

The company reported earnings per share of $0.10 versus expectations of $0.09 a share and revenues of $401.5 million, which exceeded expectations of $401 million. So with revenues and earnings both beating expectations, what caused Dropbox shares to get pummeled so savagely on Friday? Blame it on average revenue per user, which came in below expectations at $120.48 per user. That was also below the first quarter result.

The company did report an increase in paying users from 13.2 million in the first quarter to 13.6 million in the second quarter, but investors saw the growth as anemic.

Dropbox also raised its full year guidance, forecasting $1.646 billion to $1.648 billion in revenue for 2019, which was $12 to $14 million above previous guidance.

The severe drop in shares could be a buying opportunity next week, as analysts remained primarily bullish on the stock, even as it was plunging to new 52-week lows. The stock currently has 11 buy ratings, three hold ratings, and just two sell ratings. The average price target is $29.64 a share, or roughly 60% above Friday’s closing price of $18.71 a share.

Several analysts vented their frustrations over the drop in share price following the results, which beat Wall Street expectations on nearly every single metric. As Richard Davis of Canaccord Genuity said in an investor note “All relevant forward-looking metrics for Dropbox were favorable this quarter.”