BofA analyst Michael Funk initiated Dropbox (NASDAQ: DBX) with a Buy rating and $34 price objective in a note Tuesday, stating they find the stock "attractive."

The analyst said Dropbox isn't "a sexy, high growth, negative cash flow, next-generation software stock with a valuation dependent on market development and out-year profitability. Dropbox has a large existing user base, high revenue visibility, 30%+ FCF margin and the potential to return material capital to shareholders."

He based the Buy rating on: "1) strong FCF generation and potential incremental returns to shareholders; 2) Price to free cash flow (P/FCF) as an empirical factor of outperformance during Fed tightening cycles; 3) a compelling risk-reward profile based on our bull/base/bear case analysis; 4) upside to consensus revenue estimates; and 5) a business model and valuation that was largely untouched by the pandemic."

"Dropbox is a category leader in the file sync, share and collaboration market. Dropbox's large user base with 700M+ registered users and 17.4M paying users and low customer acquisition costs create a strong monetization engine and potential for increased returns to shareholders," concluded Funk.

Dropbox shares are up over 2% Tuesday.

By Sam Boughedda