Dropbox Stock Slumped 7.7% on May 13

President Trump’s tweet

On May 13, 2019, the markets fell as China retaliated against tariffs imposed by the United States. Since President Donald Trump’s tweet last week, stocks in the S&P 500 (SPY) have lost $1.1 trillion in market value. The SPDR S&P 500 ETF (SPY) fell 2.5% on May 13 and is down 4.5% so far in May.

Tech stocks spiraled downward on May 13. The Technology Select Sector SPDR ETF (XLK) fell 3.8%, while the PowerShares QQQ Trust, Series 1 ETF (QQQ) fell 3.5%. Last week, President Trump threatened to increase tariffs on $200 billion worth of Chinese goods as well as to impose new tariffs on goods worth $300 billion.

Dropbox Stock Slumped 7.7% on May 13

China retaliated by increasing tariffs on goods worth $60 billion. The trade war between two of the largest economies will result in choppy markets, at least in the short term. Tech stocks made an impressive comeback in the first four months of 2019, and they’re now set to experience short-term weakness.

Stock returns for Dropbox

Shares of cloud storage company Dropbox (DBX) fell 7.8% on May 13 to close trading at $21.68. Dropbox stock is currently trading 17% above its 52-week low of $18.50 and 50% below its 52-week high of $43.50. Dropbox stock has now risen 6% this year despite falling 7.8% on May 13.

Is Dropbox still overvalued?

Now that tech stocks have corrected, are they good buys at their current levels? Dropbox has a forward 2019 PE multiple of 50.6x, and this multiple stands at 40.0x for 2020. In comparison, Dropbox’s EPS are expected to fall 4.9% in 2019 and rise 43.6% in 2020.

Dropbox looks expensive considering its negative earnings growth this year. However, its robust expected EPS growth for 2020 holds it in good stead and should keep investors interested.

Wall Street estimates

Of the 12 analysts tracking Dropbox stock, seven have given it “buy” recommendations, four have given it “holds,” and one has given it a “sell.” The average 12-month target price for Dropbox is $32.38, indicating that the stock is trading at a discount of 49% to the consensus estimate.