Dropbox is clearly insanely profitable at only 65 employees. Especially because they are running de-duplicated storage on top of highly negotiated AWS pricing (they are likely the biggest AWS customer, and AWS certainly does custom pricing deals for big customers).
And startup P/E ratios should be higher than established companies because you are making a riskier bet for a higher potential payoff.
They could be doing $100 million in revenue (a 4% freemium conversion on their $99/yr plan at 25E6 users) and it wouldn't be crazy at all. Or any number of other configurations.
Alternate Scenario 1: (25M * 10% paying* $120/customer * 50% margin)/$10BN=66 PE
Alternate Scenario 2: (25M * 10% paying* $200/customer * 50% margin)/$10BN=40 PE
Alternate Scenario 3: (25M * 20% paying* $200/customer * 50% margin)/$10BN=20 PE
Btw- I have heard Dropbox has 20%conversion rates so scenario 3 is not that outlandish.
Another way to look at it- if you bought a stalwart tech company (Google/MS/EMC etc) at 66 PE multiple (Scenario 1) at IPO stage- you would have made money 2-3 years from then.
Question - how wide is Dropbox economic moat? Or more simply how low are Switching costs?
I have been analyzing internet companies sometime now for overvaluation and I don't Dropbox (from an outside in looking perspective) is overvalued.
If Dropbox pulls in $100 million in revenue this year, a $10 billion valuation is 100x revenue. That is a very high multiple.
Consider 25 million users. Even if all 25 million were on the $9.99 plan, that would mean each user pays $119.88 a year, and you're talking a total annual revenue of $2,997,000,000. If everyone was on the $19.99 plan you're looking at annual revenues of $5,997,000,000.
Factor in the storage costs (which I'm sure they'll get a good rate for but don't have any data for) and a $10 billion valuation is simply ludicrous.
The numbers just don't stack up.