Nomura Instinet analyst Christopher Eberle last night initiated Dropbox (DBX) with a Reduce rating and $21 price target. The shares closed yesterday up 95c to $33.27.

Dropbox's “consistently low” penetration rates, “extremely low” conversion rates, and lack of enterprise salesforce creates little room for upside potential, Eberle tells investors in a research note. If trends do not improve, the shares have “significant downside,” the analyst argues. Eberle admits, however, that Dropbox has positioned itself as a top player in the backup storage and workplace collaboration space.

The company is a “staunch competitor” to Microsoft's (MSFT) OneDrive, Google's (GOOG, GOOGL) Drive and apple's (AAPL) iCloud, Eberle contends.