Why Box Inc. Stock Fell 11.8%

What happened

Shares of cloud storage company Box (NYSE: BOX) fell as much as 11.8% on Thursday, following the company’s fiscal first-quarter results. As of 12:27 p.m. EDT, shares are down about 10%.

The stock’s decline comes after a sharp run-up over the last several weeks. Leading up to the company’s first-quarter earnings report, shares were up 29% year to date. With such a steep rise in Box’s stock before this report was released, first-quarter results and guidance may have simply failed to live up to investors’ high expectations.

Image source: Getty Images.

So what

As Box’s paying customers reached 85,000 during the quarter, the company reported a fiscal non-GAAP loss per share of $0.07, narrower than a non-GAAP loss per share of $0.13 in the year-ago quarter. Revenue was $140.5 million, up 20% year over year.

“We delivered solid top line growth and improved cash flow from operations by $10 million year-over-year in the first quarter,” said Box CFO Dylan Smith about the quarter in the company’s first-quarter press release. “Our continued focus on driving higher product attach rates and expanding our penetration in the large enterprise market position us for long-term growth on our path to $1 billion and beyond.”

Box’s first-quarter revenue growth was notably below its 24% revenue growth in the fiscal fourth quarter of 2018.

Now what

For fiscal 2019, Box said it expects revenue to be between $603 million and $608 million, representing year-over-year growth between 19% and 20%. This growth would be down meaningfully from Box’s 27% year-over-year revenue growth in fiscal 2018.

During the company’s first-quarter earnings call, Smith said the majority of the company’s growth in the foreseeable future is expected to be weighted toward seat growth, or expanding use of the company’s services, within its customer base. But Smith said new products should also help drive growth:

[A]s we highlighted on our Q4 call, we set the high watermark [for new products] with about 1/4 of our total new bookings coming from those newer products, and we would expect, over time, both that the products that we do have mature in the market as well as we introduce newer products for a greater and greater percentage of overall sales to be coming from those newer products.

As Box’s growth decelerates, investors will be looking for new products and seat growth to help this deceleration to moderate.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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