Box Undervalued? Analyst Flags Overly Pessimistic Views Amid AI Monetization Push

BofA Securities analyst Michael Funk initiated coverage on Box Inc BOX with a Buy rating and a price target of $40.

The rating implies an upside potential of 24%. As the leading enterprise data repository, Funk considers Box well positioned for AI monetization opportunities as the market transitions from simply storing data and documents to extracting value, insights, and increased productivity by leveraging AI.

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Moreover, enterprise headwinds (like tighter budgets and right-sized headcount) are fading, yet valuation at 13.4 times Street calendar 2025 free cash flow still reflects an overly bearish view of revenue growth and margin expansion potential given a raft of new product offerings (Box AI Studio, Workflow, Security and Box Doc Gen).

Funk estimates Box’s Intelligent Content Management (ICM) portfolio will expand the company’s addressable market to $26 billion. This market is projected to grow at a 13% CAGR through 2028. While this arena is fragmented and includes several large firms, Funk noted Box can carve out a substantial niche based on its entrenched position as an enterprise data repository and compelling AI product roadmap.

Further, he said the 2024-2027 consensus revenue CAGR of 6.7% (versus BofA at 7.3%) and his growth versus maintenance valuation analysis signals an overly pessimistic view of ICM.

The price target implies a 2025 EV/FCF multiple of 15 times Funk’s above-street estimate. That compares with the average of 21 times for low-growth software peers and collaboration peers, at a median of 24 times.

Funk projected fourth-quarter revenue of $279.97 million and adjusted EPS of $0.46.

Price Action: BOX stock is up 1.81% at $32.86 at last check Thursday.

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