Box Inc: Should You Buy The Post-Earnings Dip?

Cloud content management and file sharing services provider Box Inc BOX reported 16 percent revenue growth and 26 percent billings growth Wednesday after the close. The bottom line revealed a narrower net loss of 13 cents per share on a non-GAAP basis, in line with the consensus.

The guidance for the fiscal fourth quarter as well as the full year 2018 also fell in line with estimates.

Notwithstanding the solid results and guidance, Box' shares slid over 5 percent in after-hours trading Wednesday.

Against this backdrop, one analyst discussed whether the post-earnings dip presents a buying opportunity.

The Analyst

KeyBanc Capital Markets analyst Rob Owens reviewed the third quarter esults. The analyst maintained an Overweight rating and $27 price target for Box Inc. 

The Thesis

Box' Q3 results were largely in line and featured healthy upside to free cash flow expectations, Owens said in a Wednesday note. (See Owens' track record here.) 

While a few large deals that fell through deprived the company of upside in the quarter, Owens said he sees the after-market pullback providing opportunity for investors. 

The low end of the fiscal 2018 earnings per share and revenue guidance were raised, and the positive free cash flow guidance for the fourth quarter was reiterated, Owens said. 

Box's long-term deferred revenue mix jumped to a two-year high at 11 percent due to customers opting for multiyear prepayment, Owens said.

Box expressed confidence in closing out large deals in the fourth quarter and for the deferred revenue mix to normalize, the analyst said. 

The improvement in the underlying story positions the company to become a much larger and more strategic vendor in the coming years, according to KeyBanc. 

"We recommend investors be opportunistic as the underlying story continues to improve and has multiple potential upside drivers in the out-year, in our view." 

The Price Action

In pre-market trading, Box shares were down 5.42 percent at $20.75, although they are up over 58 percent year-to-date.

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