The market downturn has hit all industries particularly hard, for some wiping out most gains for the year and for others even worse. Although Box Inc. (NYSE: BOX) has suffered through this like many others, it may be poised to make a big comeback.
Monday was the worst trading day on Wall Street since the financial crisis. The S&P 500, Dow Jones industrial average and Nasdaq each saw losses of over 6% on that day alone. Oil prices were the main driver for Monday’s sell-off, and the prevailing headwinds of COVID-19 have only added to this downturn.
Box stock has sold off by roughly a quarter since February 19, when the downturn initially started. While this is obviously a setback for shareholders, Box’s cloud-based model built around data protection insulates it somewhat against coronavirus concerns. At the same time, Box’s cloud content management platform may come in handy when the market recovers and even as a part of the “stay-at-home economy.”
Box Has Its Work Cut Out for It
Online cloud-based storage is a fairly competitive field. The industry is dominated by the likes of Amazon Web Services, Alphabet, Microsoft, Apple’s iCloud and Dropbox.
That is not to say that Box can’t compete. In fact, Box has a popular following and niche carved out among large companies. Currently, Box claims to have 97,000 companies and 68% of the Fortune 500 as customers.
It’s worth pointing out here that competing with these giants is no easy feat, and going up against Microsoft, Alphabet and Amazon will be tough, with their nearly limitless capital, brand recognition and massive research and development arms. Not to mention, these companies already have large customer bases that could be cross-sold on the cloud.
CSI Market recently reported that Box’s market share is only 20% of the current market. Some are concerned with Box’s slow growth rate and believe that its market share could easily fall.
One problem for all these companies, particularly Box and other midsized players, is that they have no “economic moat,” as Morningstar recently pointed out.
Quarterly Earnings
Box reported its most recent quarterly and fiscal year results on February 26, and while the stock price saw a handy gain in response to earnings, Box shares are still lower since the market downturn started.
Analysts had expected quarterly revenues of $181.6 million and earnings per share (EPS) of $0.04. Box beat on both the top and bottom lines, with revenues coming in at $183.6 million and EPS of $0.07.
Comparatively, revenues increased 12% year over year. At the same time, deferred revenues increased 13% to $423.8 million and billings increased 19% to $281.9 million.
24/7 Wall St.Looking ahead to the fiscal first quarter, Box expects to see EPS in the range of $0.04 to $0.06 and revenue between $183 million and $184 million. Unfortunately, the company does not predict GAAP profitability in this time. For the first quarter, analysts anticipate that EPS will come in at $0.05, and the consensus revenue estimate is $183.52 million.
Aaron Levie, co-founder and CEO, commented on results and the future of Box:
In fiscal 2020, we launched two major new products, Box Relay and Box Shield, building out our multi-product platform and solidifying our leadership in the cloud content management market. With these added capabilities, we are seeing more and more of our customers adopt the full power of Box through our Enterprise Suite offering. Looking ahead to FY21, we are focused on driving healthy growth and significantly improved profitability.
Time Is a Circle, or Box
Levie originally founded Box in 2005, like almost all other Silicon Valley startups, in his garage. After a decade of work, Box had its initial public offering (IPO) in 2015, when the stock priced at $14 per share but actually reached as high as $24.73. While this was an auspicious start for Box, the company hit an all-time low (just below $10) a little over a year later.
This would only be the start of the rally for Box. Within a couple of years, shares had nearly tripled off the lows to an all-time high of just over $28. However, this began a downtrend that the company has not recovered from yet.
After this most recent market sell-off, shares are down to near $11 per share. This is below the range where shares were originally expected to price in Box’s IPO just five years ago. Who knows where it will go from here?
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