Box Inc (NYSE:BOX) investors appear to have been spooked by the soft guidance the data-storage firm offered for the third-quarter, sending shares tumbling nearly 11% in Wednesday’s trading session.
Specifically, the company expects Q3 revenue in the range between $154 million and $155 million and a non-GAAP loss per share between $0.08 and $0.07. On average, analysts expected Q3 revenue of $155 million and a third-quarter loss per share of $0.06.
However, Canaccord’s top analyst Richard Davis remains bullish on BOX, reiterating a Buy rating with a $30 price target, which represents a potential upside of 26% from where the stock is currently trading.
Davis is one of the company’s biggest bulls, and he is also ranked #1 out of 4872 analysts, according to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform.
Davis wrote, “Our view remains unchanged on Box. Specifically, we believe Box has a strong and improving franchise for companies with complex structures and/or regulated industries for whom Box’s exemplary reputation as a secure, manageable platform is especially attractive. While now is not the time to harvest, as we noted in our preview this week, we explained how we believe Box could very quickly reach 30%+ EBITDA margins. The point here is that the bear case that this firm cannot generate respectable margins fails the test of logic. It is no secret that we are in a hyper inflated software valuation world, but if you run regression on Growth + Margin on C2019E, BOX in theory should be valued at 8.3x EV/R, not 4.9x, to be average. Well, that seems hyper aggressive, but what if we got “only” a 1-2 EV/R multiple increase? That would get us a $35+ stock price based on our C2020E (note we have an IRR FCF valuation method that supports this analysis). Of course, if there is any truism in software, it is that valuation without consistent execution is a synonym for “value trap.” Box is executing better in our opinion – not perfectly – but broad metrics are improving. This, at the core, is why we continue to have a BUY rating on this stock.”
Net net, when it comes to Wall Street’s bet, the odds are on this cloud storage player, with TipRanks analytics showcasing BOX as a Strong Buy. Out of 9 analysts polled in the last 3 months, 7 are bullish on the stock while 2 remain sidelined. With a return potential of nearly 25%, the stock’s consensus target price stands at $30.00. (See BOX’s price targets and analyst ratings on TipRanks).