Shares of Dropbox (DBX 4.12%) rose 14.9% in February 2020, according to data from S&P Global Market Intelligence. The provider of cloud-based file hosting services and other lightweight productivity tools posted a modest earnings surprise last month, but the real meat of that report was found in the company's strategy shift toward a more profitable business model.
Like so many growth stocks, Dropbox has kept a laser-like focus on revenue growth so far. Earnings have been spotty and often negative, but the company's top-line sales are skyrocketing. That will change in short order. In the earnings call, Dropbox CEO Drew Houston promised to focus on "higher productivity and free cash flow in 2020," aiming for positive earnings on a GAAP basis by the end of the year.
The profit-seeking ambitions didn't end there.
"Longer term, we plan to drive accelerated margin expansion as we continue to innovate and methodically extend our platform into new markets," Houston said.
The company also introduced a $600 million share buyback plan, backed by $1.2 billion of cash equivalents and nearly $400 million of free cash flows in fiscal year 2019. Dropbox is growing up before our eyes, starting up procedures and policies that often are reserved to truly mature tech companies. I don't expect Dropbox to kick off a dividend plan any time soon but it's good to see the company heading in a more stable and predictable direction.