What Happened?
Shares of cloud content storage and management platform Box (NYSE: BOX) fell 7.6% in the morning session after the company reported underwhelming third-quarter financial results. Its revenue was in line, and its billings slightly missed.
On the other hand, It was great to see Box beat analysts' EPS expectations this quarter and raise its full-year EPS guidance. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes. The market seemed to focus on the negatives, and the stock traded down.
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What The Market Is Telling Us
Box’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock gained 10.3% on the news that the company reported fourth-quarter results with revenue narrowly exceeding expectations while EPS beat by a more convincing margin. Other key operating metrics, including billings, adjusted EBITDA, and free cash flow, came in ahead of Wall Street's expectations, indicating a healthy balance toward driving growth and profitability.
Despite a challenging macro environment leading to "pressures on IT budgets," management highlighted a year-on-year increase in price per seat during the quarter. Net retention rate is also expected to bottom out at 101%, with FY'25 retention rate "in line with or slightly above our Q4 results." Beyond FY'25, net retention rate is expected to accelerate.
Looking ahead, guidance was relatively in line with expectations, showing that the company is staying on track and presenting the market with no major surprises.
Lastly, Box seems excited about the AI potential of its platform, saying, "With advancements in AI, companies are accelerating their adoption of the cloud and transforming how they work with their content...Box is at the center of some of the most important trends in technology history as companies look to digitize and automate their businesses." Zooming out, this was still a decent, albeit mixed, quarter, showing that the company is staying on track.
Box is up 23.9% since the beginning of the year, but at $31.97 per share, it is still trading 10.3% below its 52-week high of $35.65 from November 2024. Investors who bought $1,000 worth of Box’s shares 5 years ago would now be looking at an investment worth $1,816.
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