What Happened:
Shares of cloud content storage and management platform Box (NYSE:BOX) jumped 9.8% in the afternoon session after the company reported first quarter results with revenue narrowly outperforming Wall Street's estimates, while EPS beat by a more convincing margin. On the other hand, its billings unfortunately missed analysts' expectations, and its revenue guidance for next quarter missed Wall Street's estimates. While full year revenue guidance was lowered, it was due to foreign exchange. Constant currency revenue growth for the year was actually raised to 7% year on year growth from 6% growth prior. In addition, profitability ratios contributed to the positive aspect of the results as gross margin improved, surpassing analysts' expectations. Lastly, the company continued to generate positive free cash flow. Overall, this was a mixed but decent quarter for Box.
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What is the market telling us:
Box's shares are not very volatile than the market average and over the last year have had only 4 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not 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 dropped 12.3% on the news that the company reported second quarter results that missed analysts' expectations for billings, though revenue and earnings per share (EPS) came in ahead. Looking ahead, revenue and non-GAAP operating profit guidance for next quarter underwhelmed. Full-year revenue guidance was slightly lowered and also missed Wall Street's estimates. Lastly, non-GAAP operating profit for the full year was also below expectations.
Management hinted at the drivers of the weaker near-term outlook, adding that "While ongoing economic factors have affected our customers' IT budgets and put pressure on our projected fiscal 2024 growth rate, we remain committed to our long-term revenue growth targets as we continue to drive gross margin and operating margin expansion in FY24 and beyond."
Overall, the results could have been better. Following the results, Craig-Hallum analyst Chad Bennett downgraded the stock's rating from Buy to Hold (Neutral).
Box is up 5.1% since the beginning of the year, but at $27.15 per share it is still trading 14% below its 52-week high of $31.57 from July 2023. Investors who bought $1,000 worth of Box's shares 5 years ago would now be looking at an investment worth $1,412.
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