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Box is about to get a chance to prove investors wrong after its stock lost all its IPO gains (BOX)
Box, the enterprise cloud file sharing platform, has been trading below its $14 IPO price for a couple weeks now, but that doesn’t seem to have soured analyst confidence in the 10-year old company.
In fact, some even say it’s an opportunity to buy up more stock of Box, as they anticipate an overall beat in its quarterly results on Wednesday.
“The company’s still losing money, but the top line growth will be ahead of expectations and the loss will be narrower than expected,” Pacific Crest senior research analyst Rob Owens told Business Insider. "I think it presents an opportunity for investors from this point moving forward."
Owens said Box has been consistently signing up large enterprise customers recently, including LinkedIn, the US Department of Justice, and Oxford Industries. He believes continued adoption of large customers will only improve Box’s cash flow, which he anticipates to reach break even as soon as late in its next fiscal year.
With regards to the recent drop in Box’s share price, Owens simply attributed it to the huge market correction we’ve been seeing lately — which at one point resulted in more than a 15% loss across the board. On top of that, the lockup expiration on July 22, which allowed Box investors to sell their shares, contributed to the price dip, he said. Box shares lost nearly 20% of its value since the lockup expired, trading as low as $12.90 a share at one point.
Box is scheduled to have another lockup expiration on September 14, when executives and employees will be allowed to sell additional shares, but Owens said it won’t cause huge insider selling, as most of them remain strong believers in the company.
“I think Box’s platform is seeing enterprise adoption beyond what the street perceives,” he said. “I don’t think there’ll be meaningful activity from company execs.”
Raymond James analyst Terry Tillman told us in a previous interview that because of the macro worries and the lock up expiration, Box’s shares could remain volatile until the next fundamental update, making tomorrow’s earnings that much more important.
“It’s not uncommon for a young, recently IPO’d company to be volatile both on the upside and the downside,” Tillman said. “It can remain volatile until we get the next fundamental update, which is the next earnings release.”
Box is scheduled to report its quarterly earnings on Wednesday, its third as a public company. It gave revenue guidance in the range of $69 to $70 million, while analysts expect $69.81 million.
While many Box employees, both former and current, expressed confidence in the company’s future growth prospects, at least one former employee we spoke to said the clock is ticking for Box to prove its model is working.
“My biggest thing as a former employee is, ‘Great if you’re making investments, but how do you prove those investments are actually generating returns?’ I think that’s where the jury is out, and now you’re getting to a point where you have to prove it,” said the former employee who declined to be identified due to regulatory issues. “The stock price will be a reflection of whether people buy into their story or not.”