Box (NYSE:BOX) is a cloud company that doesn’t trade like a cloud company.
It’s also a good example of making lemons from lemonade.
Box was founded in 2005, at the dawn of cloud, and positioned itself as a consumer service. Within a few years, however, Alphabet (NASDAQ:GOOGL) and its rivals were giving away gigabytes of space free to consumers, almost more than they wanted.
So, Box evolved. It now positions itself as a content management company, a Software as a Service (SaaS) platform for collaboration, process automation, and the creation of custom data protection, security and compliance features.
This has won Box corporate business and helped it integrate with smaller cloud players like ServiceNow (NYSE:NOW). Techcrunch calls it an “enterprise cloud stalwart.”
What it hasn’t done is make BOX stock’s post-IPO shareholders a ton of money.
Founder In a Box
Since Box went public in early 2015 with initial trades over $24 per share, BOX stock has fallen to below $11 per share and, in the last two years, more than doubled from that price as its new business model has taken hold.
Box stock is due to report earnings August 28, with analysts expecting a loss of 5 cents per share on revenue of $146.2 million. The loss is forgiven because Box is growing, the top line nearly doubling from 2015 to 2017, and the company is now on pace to achieve nearly $600 million in revenue by the end of its fiscal year in January, twice what it did in 2016.
This is rebuilding the reputation of Aaron Levie, who co-founded Box with Dylan Smith as a college business project at USC when he was just 20 and acted as corporate spokesman on TV for the next decade. Now 32, Levie’s former “house of horrors” has a market cap of $3.6 billion.
Levie was made “rich, but not Silicon Valley rich” by the Box Stock IPO. He has since shown serious operating chops in reinventing the company, bringing in managers like Stephanie Carullo from Apple (NASDAQ:AAPL) as chief operating officer.
Analysts have turned around, too. Of the 13 now following the company 8 have it rated as a buy. Typical is D.A. Davidson analyst Rishal Jaluria, who initiated coverage in February with a price target of $25 , which the company has now exceeded.
When a stock makes an analyst look good, they come back.
Box Today
Levie isn’t invited on TV as much as he once was, and there are younger entrepreneurs to follow, but Box stock has become an institutional favorite, with positive operating cash flow, only $40 million in long term debt on $528 million of assets, and a clear growth path.
It reminds me of a company called Harbinger, which I worked for in 1984. They built a home shopping service on floppy-disk PCs. I co-wrote the manual. The press conference launch was embarrassing, although the food was good, and I lost track of it. But from that failure they found they had built a corporate invoicing system, considered quite nifty for the 1980s. The company was eventually sold off to Peregrine Systems for $2.1 billion.
The Bottom Line for BOX Stock
Box is a get-rich-slowly stock, becoming healthy on its own, but you can easily see it being sold-off, in time, to a larger company, setting up Levie for the next stage of his career. When his hair is all white, he’ll still be a respected player in the Silicon Valley game.
But Levie is no Mark Zuckerberg, and Box is no Facebook. It is what it is, a corporate storage and software company. For investors, that should be good enough.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.
