Box shares drop 10% on soft guidance; analysts downgrade

Box (NYSE:) shares fell about 10% in pre-market Wednesday after the company reported its second-quarter results and offered guidance.

came in at $0.36, better than the consensus estimate of $0.35. Revenue increased 6% year-over-year (up 9% in constant currency) to $261.43 million, compared to the consensus estimate of $261.32M.

“While ongoing economic factors have affected our customers’ IT budgets and put pressure on our projected fiscal 2024 growth rate, we remain committed to our long-term revenue growth targets as we continue to drive gross margin and operating margin expansion in FY24 and beyond,” said CFO Dylan Smith.

Despite better-than-expected Q2 results, the company provided a soft guidance.

For Q3/24, the company expects EPS in the range of $0.37-$0.38 and revenue in the range of $261-$263M. Analysts were looking for earnings of $0.43 per share on revenue of $273.2M.

For the full year, the company sees EPS in the range of $1.46-$1.50 and revenue in the range of $1.040-$1.044 billion. The consensus stood at $1.49 for EPS and at $1.05B for revenue.

“Growth at BOX is slowing to a halt as customers continue to lower their rate of seat expansion,” said Craig-Hallum analysts.

The analysts downgraded the stock to Hold with a $30 per share price target.

“We see the rate of operating margin expansion likely to slow as BOX nears ~30% and will likely look to invest to reaccelerate revenue growth as macro pressures eventually ease. Given our outlook for moderating growth and margin expansion, we are downgrading BOX to a HOLD rating.”

William Blair analysts are more positive on BOX shares.

“While shares are likely to remain rangebound over the next few quarters as seat growth remains muted, we continue to like the stock for its inexpensive valuation (15 times EV/FCF on calendar 2024 estimates) and the opportunity for revenue growth reacceleration in fiscal 2025 as the macro normalizes and AI monetization kicks in.”

Additional reporting by Senad Karaahmetovic