Box (BOX): Better Early than Late - Cannacord Genuity

Canaccord Genuity analyst, Richard Davis, would rather be early than late in being bullish on Box, Inc. (NYSE: BOX). He upgraded the stock within the last quarter for the three reasons and believes that shares could rally 30% as the company approaches profitability.

Three reasons for the recent upgrade:

1) the concerns that we had post-IPO that the company would get pulled into a price war vortex look to be unlikely because Box has done a very good job differentiating its service

2) the company looks set to inflect from very substantial losses at the time of the IPO to becoming FCF positive in calendar Q4/16

3) the valuation, at 3.2x C2017E EV/ revenues seems unlikely to compress further

Quarterly results showed strong upside on billings and FCF and modest upside on revenue and non-GAAP operating margins. The company added 4,000 net new customers, bringing the paying customer count to 54,000, up from 45,000 in FQ4/15. Box counts 55% of the Fortune 500 as customers up from 52% last quarter.

New initiatives could accelerate revenue growth. Box Governance has closed nearly 100 deals since its June launch. The IBM partnership should begin to contribute to revenue growth as well with over 100 joint deals in the pipeline. There were two notable Box Platform wins mentioned as well, one with a global financial services leader and a second with a major investment bank.

Management improved full-year guidance for both revenue and operating margins. In terms of revenue, guidance was improved by $3.5M at the midpoint, and now represents 38% growth y-o-y. Expectations to become FCF positive in FQ4/17 were reiterated.

No change to the Buy rating or 18 PT.

For an analyst ratings summary and ratings history on Box, Inc. click here. For more ratings news on Box, Inc. click here.

Shares of Box, Inc. closed at $14.16 yesterday.

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