Dropbox stock price now up 13% on strong Q1 results

Dropbox stock price now up 13% on strong Q1 results

  • Q1 adjusted earnings: $0.17 per share vs $0.14 expected from the market analysts
  • Revenue: $455 million vs $452.2 million
  • A surge of 60% in the number of weekly active users of Dropbox's desktop app in March recorded
  • Shares of Dropbox jump 13%, test short-term resistance confluence

Shares of Dropbox (NASDAQ:DBX) have gained around 13% in the past few days after the tech company reported a strong performance in the first-quarter of the year. The buyers are now likely to push the price action towards $23.70, which hosts an important horizontal resistance. 

Fundamental analysis: First-ever quarterly profit

Dropbox reported adjusted earnings of $0.17 per share, higher than $0.14 expected from the market analysts. The revenue came in at $455 million, an increase of 18% compared to $385.6 million reported a year ago. Wall Street analysts expected revenue just over $452 million.

“We had a strong first quarter as we rallied together to support our customers and our community during this unprecedented public health crisis,” CEO Drew Houston said in a press release.

During the first quarter in 2019, Dropbox reported a loss of $7.7 million, which marks the 2020 Q1 as the first quarter in which Dropbox made a profit. Earlier this year, CEO Drew Houston said the aim is to become profitable before the end of this year. 

“We delivered healthy growth, record operating margins, and our first quarter of GAAP profitability. I’m incredibly proud of our team as we continue to build products that help facilitate distributed work at scale. We’ve built an enduring business and I remain confident in our future,” Houston added.

Dropbox believes that the lockdown measures helped the company as millions of people were forced to work from home. Since March, the tech giant registered a surge of 60% in weekly active usage of its Dropbox desktop app. 

“Certainly, a huge percentage of the world is being forced into a remote work state for the first time, but I think the effects of it will persist well beyond when we typically go back into the office,” Houston said on Thursday’s call.

Technical analysis: Stock price surges higher

As expected, Dropbox stock price gapped higher following the Q1 results as the company became profitable much earlier than anticipated. The outlook for the Dropbox stock is also very encouraging, giving that more and more people are expected to continue working from home in the near future. 

Dropbox daily chart (TradingView)

Overall, shares of Dropbox gained around 13% since the Q1 results were presented. The stock price is now testing the short-term resistance near the $23 handle, with a more substantial resistance located just below $24, while $23.73 represents the 10-month high for the stock. 

A break of this confluence of resistance below in the region of $23 – $24 would pave the way for a test of the key short-term resistance around the $26 mark. 

Summary

Shares of Dropbox surged higher in the aftermath of the Q1 results after the company reported its first-ever quarterly profit and an 18% surge in revenue.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.

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