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The global cloud file sharing & storage industry is a highly competitive industry in which there are different classes of players. Amazon AWS (AMZN), Google Cloud (GOOGL), and Microsoft’s AWS (MSFT) are some of the big contenders that make a one side of the market. On the other side of the market, you have small but innovative players such as Dropbox Inc, (DBX) and Box (BOX) among others.
Staking Dropbox or Box against any of the established players such as Google or Amazon is not exactly a fair comparison – cloud services is just of the many services that Google/Amazon/Microsoft offer while Dropbox and Box depend on cloud storage for their survival. The trio of Google, Amazon, and Microsoft can start price wars amongst themselves but neither Dropbox nor Box has the financial resources to take on such a mission against them.
Valuation
Founded in 2007, Dropbox is technically younger than Box, which was founded in 2005. More so, Dropbox only had its IPO earlier this year while Box has become a publicly traded company since 2015.
However, Wall Street seems to think that the relatively younger Dropbox is more valuable than Box. For instance, Box has a market capitalization of $3.81B while Dropbox has a market cap of $11.92B. In terms of trading price, shares of Box are trading around $27.25 per share while you can expect to trade DBX stock around $29.78 apiece.
User numbers
Dropbox is also outperforming Box in terms of user growth numbers even though it is mostly dependent on word of mouth marketing and user generated content. In as S-1 filing, the company notes that “every year, millions of individual users sign up for Dropbox at work. Bottom-up adoption within organizations has been critical to our success as users increasingly choose their own tools at work. We generate over 90% of our revenue from self-serve channels — users who purchase a subscription through our app or website… They’ve spread Dropbox to their friends and brought us into their offices.”
Dropbox has a more than 500 million subscribers and more than 11 million of them are using a paid version of its platform. In contrast, Box lays claim to a paltry 41 million users. In the Enterprise segment, Dropbox say it has more than 300,000 Dropbox Business teams whereas Box only has 82,000 paying organizations as customers. However, Box claims that it is choice cloud file sharing system for 59% of Fortune 500 companies.
Growth rates
The third point that can help you make an informed investment decision between Dropbox and Box is to examine the growth rates of the two companies. In fiscal 2017, Dropbox posted revenue of $1.1 billion while Box’s revenue in the same period was $506 million. Both companies are yet to turn a profit, but Dropbox’s losses are noticeably becoming narrower than Box’s losses. For instance, in fiscal 2017 Dropbox reported losses of $112 million while Box’s losses amounted to $155 million in the same period. More interesting is the fact that Dropbox’s $112 million loss in 2017 is a significant decline from the $210 million loss that it posted in fiscal 2016. In contrast, Box’s losses has increased from $152 million in fiscal 2016 to $155M in fiscal 2017.
Final words
Dropbox remains untested on Wall Street relative to Box, and some investors are worried that Dropbox’s valuation might be somewhat overpriced because of the hype surrounding its IPO. Nonetheless, the fundamentals of Dropbox’s business and its rapid growth rate, relative to Box makes it a potentially better investment option.
