Dropbox has unbelievable week, leads huge rally in new software IPOs
2018 might have witnessed a “tech backlash” over its first half, but the effect it’s had on the technology sector overall, for the most part, appears to be underwhelming. Even the companies at the heart of the storm seem to be holding up okay, and some (think Amazon and Netflix) are positively surging.
However, even in this climate, some tech stocks are outperforming the outperformers: new software IPOs. And the undisputed king of them last week was Dropbox. What makes it so great? For once, lets forgo discussions over what’s driving performance for a minute, and just focus on the figures: last week alone, Dropbox’s share price rose by 32%.
Dropbox’s share price had an unbelievably positive five days last week
SOURCE: Yahoo Finance
32%. Not year-to-date (which would be impressive enough), but over the last five days. Since the company’s IPO – which was only 3 months ago (March) – its share price has appreciated by 87%. There are a couple of factors responsible for this incredible run.
First of all, Dropbox’s fundamentals are good. The company’s making progress, ticking all the boxes, and looks set to be a great growth story. But perhaps more importantly, many investors are wondering if it’s a possible acquisition target. A spate of M&A activity in the sector (think of Microsoft’s recent purchase of GitHub for $7.5 billion) suggests that’s possible.
Whether Dropbox is on some tech titan’s wish list or not, the company added nearly $4 billion to its market cap last week. If that’s not worth celebrating, nothing is!
Dominion holds Dropbox in its Global Trends Managed Fund.
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