Dropbox showed strength last week which was remarkable especially in the light of a weak tech sector. A sign of relative strength is something that catches our eye. This article looks at the chart of Dropbox, top line and bottom line financials as well outlook. Based on this we are confident doing a Dropbox stock forecast for 2019.
Note this one of the many market forecasts for 2019, and our list will grow considerably over time.
Dropbox stock forecast for 2019: the chart
The stock chart from Dropbox looks quite choppy. It is not easy to identify the dominant trends on it which makes it even more interesting: smart investors love the ‘hidden’ or ‘implicit’ trends because less people talk about them.
With some effort we were able to find the dominant trend which is a mildly falling channel as shown on below chart. In it there is a falling triangle, and it really fits perfectly within the channel. This is a strong combination, and increases the reliability of future moves within these structures. This, of course, helps a lot in our attempt to do a Dropbox stock forecast for 2019.
There is certainly a bullish outcome that may materialize. A bullish Dropbox stock forecast for 2019 will take place if this stock will follow the path that we added as annotations: a third test of the resistance and support within the triangle, followed by a break outside of the triangle. In this scenario we will see 30.50 USD which might take place in 2019.
So our bullish Dropbox stock forecast for 2019 is 30.50 which, if broken to the upside, might result in a test of the 38 to 40 area late in 2019. This is the ultra bullish target, and certainly not a given that it will happen. Things have to be re-assessed once our first bullish target of 30.50 USD is met.
As always, the flipside must be considered. A bearish case will materialize once 23.50 USD is broken to the downside.
Dropbox stock forecast for 2019: top and bottom line financials
Which scenario will take place: the bullish or bearish? That’s of course a key question to consider in any forecast, first and foremost this particular Dropbox stock forecast for 2019.
We believe top and bottom line financials underpin a bullish outcome. However, in the interim, we have identified one particularly concerning data point which might explain recent weakness.
Top level financials are great. Dropbox continues to create revenue in a steady and stable way. Moreover, guidance for next quarters is great. As per this recent Dropbox news item “the company raised its guidance for the full year. It’s now looking for $1.366 billion to $1.372 billion in revenue across all of 2018; analysts are expecting $1.357 billion in revenue, according to Thomson Reuters.”
Moreover, bottom line Dropbox is in an unusual position to show profits. That’s great.
So why is there any weakness in recent weeks combined with strength during last week’s tech sector sell off? We believe the sudden growth of shares outstanding from 220m to 400M may be concerning. This comes after a similar decline from 400M to 220M in the previous quarter. Presumably it explains why short interest in this stock is so high, above 40% short float.
This set of high level financial data certainly underpins the scenario we laid out on the chart: continued consolidation before any break higher. Dropbox has to convince investors in the meantime that all is good with the company, and that their bullish guidance will be met, if not exceeded.
This article is not meant to be a buy or sell call. It only serves an educational purpose.