Dropbox got a 'Buy' rating from 6 of its IPO underwriters - but a lone analyst at one of its bankers says investors should be careful

• Six out of seven of Dropbox's underwriters think its stock is a good buy, according to separate reports published by analysts on Tuesday.
• Analysts set 12 month price targets for Dropbox ranging from $30 to $40. The stock currently trades just a few cents shy of $30.
• But a seventh analysts, John DiFucci at Jefferies, rated the stock as a "hold," and is worried that Dropbox won't hit its goals as quickly as other analysts seem to believe.

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Wall Street has bid up Dropbox's stock since the company's splashy IPO last month.

Now it's time for the analysts to weigh in.

In the first batch of reports initiating coverage of the file sharing company this week, the research groups of the banks that underwrote Dropbox's IPO deliver a chorus of bullish prognostications.

Banks praising the company they recently took public is about as unsurprising as a politician promising a new era - after all, these banks just sold the company's shares to their clients.

But not every bank was equally breathless.

John DiFucci at Jefferies was the lone analyst from the group of underwriters to withhold the "Buy" rating, giving Dropbox a "Hold" and a relatively modest price target of $31. Hold is what it sounds like - don't buy or sell a stock, but wait and see what happens.

So what's troubling Jefferies?

At the top of his list is simply valuation, which Jefferies says has already reached the right level when measured by discounted cash flow.

Dropbox's cash flow generation "while unique for a company of this size and growth, is valued appropriately at this time," DiFucci wrote. While Jefferies' $31 price target is on the on the low-end compared to the other analysts, it still represents a 40% appreciation from Dropbox's IPO price.

But Jefferies also has some more fundamental concerns.

Dropbox is competing in a "fragmented, competitive landscape" in which competitors with "deep pockets" are a "lingering threat." Not only is Dropbox fighting Microsoft, Google and Amazon, but it will also bump up against IBM and Oracle as it expands beyond file sharing and into content management services.

Dropbox's long history as a file sharing service also has a stigma that could work against the company as it looks to branch into other markets, Jefferies says.

Dropbox's could also be constrained by its multi-class share structure, which gives less voting power to common shareholders than it does to management.

These dual-class structures have been much in vogue among consumer internet companies like Facebook and Snap in recent years, but it's not clear how suitable they are for an enterprise business, which is where Dropbox is increasingly trying to steer its business.

Dropbox has a huge market that could grow to $61 billion by 2021

That's not to say Jefferies is completely bearish on Dropbox. The firm says Dropbox has a chance to break into a massive market if it's R&D can innovate and execute.

With its current product offerings, Jefferies expects Dropbox to have a Total Addressable Market (TAM) of $37.8 billion by 2021. But if Dropbox makes the wide-sweeping product changes that it has promised investors, Jefferies thinks its TAM could grow to $61.3 billion by 2021.

"Overall, we believe that Dropbox is increasingly being deployed across business teams within enterprises," the note says, adding that its viral freemium model makes its paid subscription offerings highly visible and likely to catch on.

Here's how six of the other Dropbox underwriters rated the company in their initiation notes:

• JMP rated the stock as outperform, and gave it a price target of $35.
• KeyBanc rated the stock as overweight, and gave it a price target of $40.
• Macquarie rated the stock as outperform, and gave it a price target of $30.
• PiperJaffray rated the stock as overweight, and gave it a price target of $40.
• Deutsche Bank rated the stock as buy, and gave it a price target of $36.

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