Can Box (BOX) escape the shadows of its bigger competitors? That’s the question investors will hope to have answered when the cloud content management company reports third quarter fiscal 2018 earnings results after the closing bell Wednesday.
Box has been an intriguing name since its public debut in 2015. Since then the company has grown revenue at an impressive compound annual rate of 32%, while boasting a 109% customer retention rate. But due to increasing competition from the likes of Dropbox (DBX), Atlassian (TEAM) and well-funded startup Slack, among others, Box's rate of growth has fallen off, reaching just 20% in the second quarter.
The company’s revenue growth deceleration has come despite the company forging strategic partnerships with the likes of Microsoft (MSFT), IBM (IBM) and Google (GOOG , GOOGL). The management has been investing in ways to grow and to continuously improve the platform and has begun to deploy its cash, exploring ways to build up its suite of data management products. But with downbeat billings growth forecast, there is now the fear of the company throwing good money after bad.
In the three months that ended October, the Redwood City, Calif.-based company is expected to post a per-share loss of 7 cents on revenue of $154.61 million. This compares to the year-ago quarter when the loss came to 13 cents per share on revenue of $129.3 million. For the full year, ending in December, the loss of 18 cents per share is expected to narrow for 43 cents a year ago, while full-year revenue of the $607.52 million would rise 20% year over year.
In the second quarter, the stock was punished even though the company beat on both the top and bottom lines, reporting Q2 revenue of $148.2 million, which was above of analyst forecasts for $146.5 million, while the adjusted loss of 5 cents per share topped expectations for a 6-cent loss. The company’s revenue guidance range of $154 million to $155 million (below the consensus estimate of $155 million) sparked a selloff.
Serving some 85,000 corporate clients, Box is nonetheless well-entrenched among Fortune 500 companies in the cloud file-sharing market. While larger rival Dropbox, which IPOed earlier this year, means Box is not alone anymore, the cloud file-sharing market, which IDC estimated to total $50 billion. This means there’s a big enough pie out there for Box to grow its revenue streams despite increased competition.
On Wednesday, however, investors will want to see Box, which generated $506 million in revenue last year, better position itself to seize the lion's shares of the market. And for investors who are willing to give the company time to realize its earnings growth potential, which Wall Street pegs at an average rate of 26% over the next five years, Box — which has fallen some 20% year to date — may yet be an appealing investment.