Box, a cloud-based storage-services company, saw a decline in its stock shares following the release of its financial results for the July quarter. The company attributed this decrease to weak corporate spending on information technology, influenced by ongoing economic factors.
In its earnings announcement, Box stated that these economic factors have impacted its customers’ IT budgets and have consequently put pressure on the projected fiscal 2024 growth rate of the company.
As a result, the stock price of Box dropped by 8.3% to $28.25 on Wednesday morning.
Financial Performance
During the fiscal second quarter, Box reported a revenue of $261.4 million, representing a 6% increase compared to the previous year. After adjusting for foreign exchange, the revenue growth reached 9%, slightly surpassing the Street consensus forecast of $261.1 million. The company’s adjusted profits amounted to 36 cents per share, exceeding analyst expectations by one penny. However, under generally accepted accounting principles, Box’s earnings per share stood at 4 cents.
On the other hand, billings for the quarter totaled $232.5 million, indicating a 1% decline compared to the same period last year. This fell short of Wall Street’s expectation of low single-digit growth.
Disappointing Guidance
Despite decent financials for the second quarter, Box provided disappointing guidance for the upcoming months. For the October quarter, the company projected a revenue range of $261 million to $263 million, falling below the Street consensus of $265.6 million. At the top end of this range, the revenue growth would only reach 5% compared to the previous year. Additionally, Box’s adjusted profit forecast of 37 to 38 cents per share was slightly below the consensus estimate of 39 cents.
Looking further ahead, Box revised its forecast for the January 2024 fiscal year. The company now anticipates a revenue range of $1.04 billion to $1.044 billion, representing a 5% increase from fiscal 2023, but lower than the prior forecast of $1.045 billion to $1.055 billion. Moreover, Box narrowed its projection for adjusted profits to a range of $1.46 to $1.50 per share, compared to the earlier range of $1.44 to $1.50 per share. GAAP profits for the year are expected to be in the range of 17 to 21 cents per share.
Despite the challenges, Box remains committed to addressing the impact of economic conditions on its business and maximizing opportunities for growth.
Box Announces $100 Million Increase in Share Repurchase Plan
Analysts Express Concern Over Box’s Performance and Outlook
Analysts are expressing a downbeat sentiment regarding Box’s performance and outlook for the future. Brian White, an analyst at Monness Crespi Hardt, maintained a Neutral rating and a target price of $30 for the stock. In a research note, White highlighted some concerning performance metrics at the company. The net retention rate, which measures repeat business, dropped to 103% in the quarter, compared to 106% in the first quarter and 112% a year ago. White also pointed out that the company’s post-earnings conference call had a “muted” tone, suggesting that a soft economy is hindering expansion.
“While Box may entice value investors due to its undemanding valuation, improved margin profile, and generous stock repurchase initiatives, we believe that the darkest days of this downturn are still ahead of us,” wrote White.
Chad Bennett, an analyst at Craig-Hallum, downgraded his rating on Box from Buy to Hold. He also reduced his target price from $35 to $30. Bennett pointed to signs of slower “seat expansion,” indicating that customers are adding fewer new users to the platform. He cited weak growth in billings as evidence of a further deceleration in Box’s business.
Conclusion
Box’s recent announcement of a $100 million increase in its share repurchase plan has generated mixed reactions from analysts. While some remain cautious about the company’s deteriorating performance metrics and muted conference call tone, others see potential value in Box’s undemanding valuation and improved margin profile. However, both analysts agree that challenging times are still ahead for the company.