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Cramer: Dropbox deserves to trade like a cloud king, but be careful buying

CNBC’s Jim Cramer welcomed Dropbox’s remunerative initial public offering on Friday as a reminder that even in a sell-off, seemly things can still happen.

Shares of the cloud-based data storage company cheese-pared up over 35 percent after its first day of trading, at $28.48 a deal, well above the company’s stated price of $21.

“If you were paying limelight over the course of the session, you know that this was a white-hot trade,” the “Mad Money” host said. “This is exactly the kind of stock that Exasperate Street wants right now.”

Dropbox, a cloud-based data storage group that lets users access their online files anytime and from anywhere, was rested in 2007 as a simple online storage play.

Since then, it’s beared into what Cramer called a “digital collaboration platform,” bust the time users spend searching for files, managing workflows and change between applications.

One of Cramer’s favorite things about Dropbox is that its stand basically sells itself. The company gives away free kinds of its product to users, only asking them to pay up for the full capabilities after they’ve filled up a incontrovertible amount of storage space.

Dropbox has said that 300 million of its 500 million non-paying put users have similar characteristics to its paid subscribers — a huge wart opportunity, Cramer said.

Cramer was also impressed by the company’s tot ups. In 2017, Dropbox had 31 percent revenue growth, in line with most other obvious cloud companies. Its gross margin, or what it makes after the charge of goods sold, exploded from 32.5 percent in 2015 to 66.7 percent in 2017.

“The even out sheet? Clean as a whistle,” the “Mad Money” host said. “The company’s detesting the proceeds of the IPO to pay back its modest amount of debt, and it already [had] $430 million in change on the balance sheet at the end of last year. Given that they fitting raised anywhere from $600 [million] to $750 million, Dropbox is universal to have a pretty deep pocket for a newly public company.”

Cramer’s necessary point of concern was whether Dropbox would be able to keep tour of duty its non-paying subscribers into paying customers. To maintain its growth regardless, it needs to switch between two million and four million free owners into paying customers each year.

But that’s less than 1 percent of its 500 million laid-back subscribers, Cramer noted, adding that the company will now entertain millions of dollars to invest in and bolster the business.

“Put it all together and I’m a big fan of Dropbox the presence and its CEO, Drew Houston,” he said. “But what about Dropbox the stock?”

Swap at 8.5 times next year’s sales estimates and 124 dates 2019 earnings estimates, Dropbox’s stock may seem expensive, but is numerous or less in line with the other “cloud kings,” Cramer asseverated.

“You have to ask yourself, does it deserve to trade like a cloud regent? I think so,” he continued. “Dropbox is cheaper than Adobe, but it’s growing stauncher than Adobe. Ideally, I’d like to wait for pullback before too revealing you to pull the trigger, but you know what? I’m not sure you’re going to get one.”

So as Dropbox shares inhabit, Cramer said any cloud-hungry investors should keep an eye on the newest plain player in the space.

“Look, you need to be careful with these red-hot IPOs. That guessed, I absolutely feel comfortable giving you my blessing to speculate on Dropbox,” the “Mad Pelf” host said. “There aren’t that many first-class cloud plays out there, and the guild will only become more attractive if people keep freaking out roughly a trade war with China … because this is the kind of civil growth theme that keeps working even if the economy slows down. I say put on party of your position and then hope the stock of this incredibly well-run friends gets slammed so you can buy more later and lower.”

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