Why buy Dropbox (DBX)? There are several reasons to like this stock now, asserts quantitative trading specialist Steve Reitmeister, editor of Reitmeister Total Return.
This cloud based software company is used for the sharing of all forms of documents and digital files. And that list of reasons to like the stock starts with it never having an earnings miss since it went public in early 2018.
Second, is that we need more tech exposure. Yet hard to do that without overpaying. That is certainly where the value story comes into play with an average target of $36.50 with a bunch of analysts beating the table that $38-40 makes more sense. And the more and it has beat and raise quarters, the higher the fair value will go.
Third, is that I am trying to avoid any problems with the supply chain. To be honest, it feels like a mine field as the supply chain effects almost every company that provides products. And many services companies have concerns about not having the ability to hire enough staff. So we are sidestepping the supply chain by going for this cloud based software company.
Fourth, the shorts used to gang up on this stock for some insane reason that keeps proving less and less logical after each earnings beat. So at this stage there are not as many shorts on board as the past, but I like the idea of another beat and raise chasing more of them to the sidelines creating a bit more upside for shares.
Fifth, looks very good from our POWR Ratings perspective. You might be underwhelmed by the B rating — but remember that 20% of all stocks are B rated (75th to 95th percentile).
DBX is in the upper echelon of the B's at the 92.72 percentile. Helping their case is being in the top 1% of the Quality rating which is the most beneficial in finding alpha (outperformance). The top 6% showing for Growth is also a welcome sight.
