Can Box (BOX) Finally escape the shadows of its larger competitors? That’s the question, among many, investors will want the company to answer. Although Box has quickly emerged as leader in the highly competitive cloud content management segment, investors haven’t fully embraced Box's long-term growth potential.
The company is set to report second quarter fiscal 2021 earnings results after the closing bell Wednesday. With the stock down roughly 10% over the past month, bears have begun to argue that it’s time for the company to finally graduate from “potential” to out-performer. Box needs to demonstrate not only can it separate from the likes of Dropbox (DBX) and Slack (WORK), but also that it has lasting power in a segment that includes titans such as Microsoft (MSFT) and Google (GOOG, GOOGL).
To date, while the the company has shifted its business model to become a full-fledged Cloud Content Management (CCM) player, the competitive argument hasn’t been convincing enough. Amid the rapid shift to work-from-home — which would seem to benefit Box’s services — the company’s Q2 guidance also didn’t imply the level of growth investors expected from the company’s recently-launched Box Shield and Box Relay services. All told, Box has a lot to prove on Wednesday.
In the three months that ended July, the Redwood City, Calif.-based company is expected to earn 12 cents per share on revenue of $189.56 million. This compares to the year-ago quarter when the reported a breakeven quarter on revenue of $172.55 million. For the full year, ending in December, the company is expected to earn 50 cents per share, while full-year revenue of the $765.11 million would rise 9.9% year over year.
The full-year projected revenue growth rate of ~10% is small relative to the aforementioned cloud companies. It is one reason Box shares have underperformed the market over the past few years. In the first quarter, Box’s Q1 revenue growth of 13% was somewhat underwhelming, compared to other leading cloud players. Q1 adjusted earnings per share came in at 10 cents on revenue of $183.56 million. Both figures were better than Wall Street’s estimates of 5 cents per share and revenue of $181.91 million.
Investors were nonetheless disappointed and sent the stock lower. But there were some signs of stabilization. Notably, the positive adjusted EPS was reverses 3-cent loss in the same period a year ago. What’s more, not only did the company deliver 95% recurring revenue, its bookings from existing customers were also solid, coming in at upwards of 70%, suggesting that Box is, in fact, enjoying incremental growth from the shift to remote work.
There was a noticeable rate in acceleration among various industries that are looking to leverage Box’s services to meet the new demands of business digitization as well as ways to increase productivity and collaboration.The company last quarter announced what it calls, the “All-New Box experience” as a way to power increased productivity and collaboration, which includes an enhanced Zoom Video (ZM) integration which enables teams to better collaborate on content during face-to-face on video.
On Wednesday the company will need to demonstrate in its numbers that not only can these new tools and initiatives fuel higher revenue and profits, Box must show that it has graduated from “potential” to out-performer, thus dispelling competitive threats.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
Read Richard's Bio