Box's Demand Trends 'Remain Healthy,' KeyBanc Says After Q1 Print

Box Inc BOX reported Wednesday with first-quarter results that sent shares initially trading lower — but one analyst continues to see the bullish case for owning the stock. 

The Analyst

KeyBanc Capital Markets' Rob Owens maintains an Overweight rating on Box with an unchanged $33 price target.

The Thesis

Box's Q1 print consisted of upside to total revenue and adjusted billings, while better-than-expected costs of sales and operating expenses generated a 155-basis point operating margin upside, Owens said in a research report.

Encouragingly, Box signed four new deals worth more than $500,000 in the quarter versus two a year ago, and 35 new deals worth more than $100,000 compared to 26 last year.

The company's ongoing deal momentum should keep investors optimistic that top-line trends will grow in the bottom half of the fiscal year for five reasons, the analyst said:

• Continued improvements in the go-to-market motion.
• The ramp of new hires.
• Nascent partnership traction.
• Upcoming renewals of multiyear deals.
• The appeal of newer and emerging solutions such as BoxReplay and Box Skills.

Box's platform differentiation — coupled with a low penetration rate of the existing base — should prompt investors to consider being buyers on the stock's pullback, as shares are trading at a discount valuation of 5.6x EV/CY19E versus peers that trade at a 6x multiple, Owens said. 

Price Action

Box shares were trading down by 5.5 percent premarket Thursday.

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