Shares of cloud-based content management platform Box (BOX) have been a pillar of stability amid the tech-focused sell-off. On a relative basis, Box stock was mostly unscathed, especially versus the likes of some of its freshly-imploded peers in the software-as-a-service (SaaS) scene.
Box may be viewed as just another provider of cloud storage by some. In many ways, cloud storage and content management are largely commoditized. However, the company has made major strides in the area of collaboration tools. It’s this pivot that’s helped Box differentiate itself from rivals.
Indeed, Box received a nice boost from the pandemic-induced push to remote work. However, unlike most other pandemic beneficiaries in tech, Box stock has not been quick to surrender its gains. In fact, shares of the $3.9 billion cloud play have held steadier than many quality blue-chip stocks. At writing, Box stock is down just north of 18% from its all-time high at $33 and change per share.
Box Stock: A Steady Eddie in the Tech Scene
Why has Box been able to dodge and weave through the endless number of jabs thrown its way? Box stock was never expensive to begin with, and it’s not a cloud player known for its growth.
Today, Box stock trades at only 4.8 times sales. Further, the company has steadily won over a lot of impressive clients while posting meaningful improvements on the profitability front.
In this market, investors want to see profitability. Box is on the right track when it comes to margins, with non-GAAP operating margins surging to 21% in the latest quarter (Q1 Fiscal 2023). Management also increased its midpoint guidance on revenue and operating margins.
Revenue guidance for the second quarter now lies between $244-246 million, with a per-share loss in the $0.01-0.02 range. For the full year, revenue is expected in the $992-996 million range, with per-share losses between $0.05-0.01. GAAP earnings per share are expected to be around $0.28 for the next quarter.
Though revenue growth of 18% is nothing to get genuinely excited about, the firm has potential levers it can pull that may reward it with a “growthier” multiple in time.
Like many other SaaS companies, the firm may be able to upsell the existing roster of satisfied clients. Under the leadership of Aaron Levie, I do view Box as a firm that can execute, even in the face of a worsening economic storm.
Further, Box remains a smaller player in the cloud, making it an attractive — and digestible — takeover target for an enterprise behemoth like Salesforce (CRM).
I am bullish on Box stock and think it represents excellent value in the tech industry after its latest pullback. Though the recent plunge has been far milder than your average high-growth play, I think Box appears to be a baby thrown out with the bathwater in the recent round of selling.
Enterprise Spend Could Stay Resilient Ahead of Recession
The digital transformation is still very much in play, as the economy reveals more signs of weakness. Indeed, nobody wants to be caught offside as world economies tumble into a recession. Still, it’s hard to ignore the resilience in enterprise spending thus far. Salesforce delivered blowout numbers in its quarter revealed last week.
Its CEO, Mark Benioff, went as far as to say they’re “recession resilient.” Given robust demand and secular tailwinds, which are unlikely to wear off soon, it’s hard to argue with the resilience of enterprise tech in an economy that’s mostly weighed down by the consumer.
Could enterprise plays be the place to hide from coming market turbulence induced by a “consumer recession”? Possibly. Collaboration tools and other cloud services fuelling the digital transformation aren’t showing signs of slowing down.
Where does Box go as it moves above and beyond cloud storage? There’s room to run as it builds its suite of collaboration tools. While there are rivals in the space, Box has seen success in onboarding clients across its other intriguing software offerings.
Whether we’re talking about the no-code workflow platform Box Relay or the e-signature offering Box Sign, it’s clear that Box has a toe in many waters in the enterprise space. As its roster of tools grows and improves, Box could emerge as a winner in enterprise or a prize for a lucky enterprise behemoth looking for more exposure to the digital transformation.
Wall Street’s Take
Turning to Wall Street, BOX stock comes in as a Moderate Buy. Out of six analyst ratings, there are three Buy recommendations and three Hold recommendations.
The average Box price target is $32, implying upside potential of 19.1%. Analyst price targets range from a low of $25.00 per share to a high of $41.00 per share.
The Bottom Line on Box Stock
Box stock has been resilient amid the sell-off, thanks in part to solid quarterly numbers and the fact that shares never really participated in the euphoric tech-driven rally to begin with. Box is no hyper-growth play, but it is still growing at a decent rate, with an arsenal of enterprise collaboration tools that should propel it, going forward.
