Today's stock market
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Banks led the market lower, with the SPDR S&P Bank ETF (NYSEMKT:KBE) slipping 3.4%. Tech shares were big losers for the week, and the Technology Select Sector SPDR ETF (NYSEMKT:XLK) adding another 2.7% to earlier losses.
Dropbox IPO gets a warm reception
In one of the most anticipated initial public offerings (IPOs) of the year, shares of the cloud storage company Dropbox went on the market and promptly soared. The offering of 26,822,409 Class A shares was priced at $21 per share, opened trading at $29, and eventually closed at $28.48. The company's amended S-1, filed with the SEC on March 12, estimated the IPO price would be between $16 and $18.
The closing price values Dropbox at $11.2 billion, including shares held by insiders and earlier investors. According to its SEC filing, the company has 500 million users, but only 11 million paying customers, who generated $1.1 billion in revenue in 2017. The revenue growth rate was 40% in 2016 and slowed to 31% in 2017. Dropbox lost $111.7 million last year but produced $305 million in free cash flow.
The Dropbox IPO was clearly a success and a hit with retail investors, helped by the fact that the company limited the supply of shares by offering only about 9% of the company's stock to the public. Dropbox faces stiff competition from tech giants such as Alphabet and Apple, but for now, investors were willing to pay a rich 10 times sales for what they hope will turn into an even bigger story later.
Micron delivers strong sales and profit, but shares slump
Micron Technology reported fiscal second-quarter sales and earnings that exceeded expectations thanks to strong demand for computer memory, but shares still slumped 8%. Revenue for the Boise, Idaho, supplier of computer memory was up 58% to $7.35 billion and non-GAAP earnings per share more than tripled to $2.82. The consensus analyst estimates were for EPS of $2.74 on sales of $7.28 billion.
Demand for higher-speed memory drove DRAM sales, 71% of overall revenue, up 76% with average selling prices increasing in the low double digits from last quarter. A strong market for solid-state drives sent sales of NAND memory up 28% year over year despite average selling prices dropping by a mid-teens percentage since Q1.
"Micron executed exceptionally well in the second quarter, delivering record results and strong free cash flow driven by broad-based demand for our memory and storage solutions," said CEO Sanjay Mehrotra in the press release. "Our performance was accentuated by an ongoing shift to high-value solutions as we grew sales to our cloud, mobile and automotive customers and set new records for SSDs and graphics memory."
Analysts expect fiscal 2019 sales to fall 13% from this year, as the balance between supply and demand shifts in this traditionally cyclical business. In contrast, Micron executives gave an upbeat forecast for Q3 and emphasized the long-term trends fueling demand. The stock merely gave up a small bit of its recent gains, possibly because of comments about capital spending this year coming in at the high end of previous guidance, or maybe just because it was a bad day for the overall market anyway.