Earnings This Week: 2 Hot Stocks to Watch

These fast-growing stocks have seen their stocks surge this year. Can they keep up their momentum?

Daniel Sparks
Daniel Sparks
Feb 19, 2019 at 8:46AM
Technology and Telecom

As earnings season continues, a handful of notable tech companies will be reporting results for their most recently ended quarters. Two fast-growing tech companies, in particular, will be worth watching this week. These companies are website-building platform Wix.com (NASDAQ:WIX) and cloud storage company Dropbox (NASDAQ:DBX). Adding to the pressure, their stocks are up 34% and 25%, respectively, year to date.

Ahead of each of these companies' earnings reports, here's a brief preview of some key items investors will want to watch.

Check out the latest Wix and Dropbox earnings call transcripts.

Employees posing inside the Wix offices

Image source: Wix.com.

Wix.com

Wix is the first of these two companies to report quarterly results this week. It is scheduled to release its fourth-quarter and full-year results before market open on Wednesday, Feb. 20.

One important metric to watch when Wix reports its results is its revenue growth. Its top line has been on a tear recently -- rising 40% year over year in Q3. Though this revenue growth was a slight deceleration from 41% year-over-year revenue growth in the prior quarter, it put revenue well above management's guidance. Q3 revenue was $155.6 million, ahead of a guidance range for revenue between $152 million and $153 million.

For Wix's fourth quarter, management guided for revenue to be between $161 million and $162 million, representing 36% to 37% year-over-year growth.

For some further context, the analyst consensus forecast for revenue is $162 million.

Dropbox

Like Wix, Dropbox is also seeing rapid growth. The company's revenue increased 26% year over year in Q3.

The key metric for Dropbox investors to watch, however, is growth in paying users. Growth in the key metric has been decelerating meaningfully in recent quarters. Paying users in its third quarter were up 18% year over year. This compares to 20% growth in Q2 and 24% in Q1. Will this growth rate decelerate meaningfully yet again in Q4?

Fortunately, Dropbox has been making up for its decelerating growth in paying users with strong growth in average revenue per paying user. In the company's most recent quarter, average revenue per paying user was $118.60, up 5.8% year over year. This compares to 4.9% and 3.2% growth in Q2 and Q1, respectively. To this end, Dropbox CEO Drew Houston said in the third-quarter earnings release that the cloud storage company was "shipping product features and updates our users love, based on a deep understanding of our customers and the tools they need to do their best work."

Can Dropbox keep up its strong year-over-year growth in average revenue per paying user?

Dropbox reports its fourth-quarter results after market close on Thursday, Feb. 21.