This story hides some major issues with Dropbox. Atlassian had a magic number of 1.68 in the most recent fiscal quarter.ĭropbox’s IPO marketing materials make it clear that they want to be seen as the Atlassian of cloud storage, with many discussions of the benefits of the self-serve model, 500 million users, and individual accounts being upsold into enterprises. We believe this is primarily due to its efficient, self-serve, marketing-driven growth model and ability to upsell existing customers a broad suite of offerings. Atlassian’s success has earned it by far the highest revenue multiple in its peer group at 16.9x 2018 sales. Since then, the stock has been on a tear, almost doubling with quarter after quarter of revenue beats. We first wrote about Atlassian right after the IPO two years ago in: No “High” in $TEAM: Why Atlassian Will 10X Or Get Acquired. We believe the secret lies in the Atlassian story. But it doesn’t explain why Dropbox is priced at a premium to SaaS peers despite lower than average growth and margins. This clues us in to why Box has such an abysmally low multiple for a SaaS company. Using the same process as we did for Dropbox above, we found that Box had a magic number of 0.38 in the most recent quarter, and 0.31 is the prior two quarters. As a rule of thumb, a SaaS magic number above 1 is good, and a number below.
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