Are Investors Overlooking Box's IBM Connection? They Might Be

• Box, Inc. BOX has seen a decline of 43.61 percent in its share price year to date, with the shares hitting a low of $11.09 on October 7.
• J.P. Morgan’s Mark R. Murphy has upgraded the rating on the company from Neutral to Overweight, while lowering the price target from $21 to $18.
• With the sell-off in the shares, Murphy believes that the risk-reward is now favorable, while mentioning that investors might be overlooking the significance of the partnership with International Business Machines Corp. IBM

Analyst Mark Murphy sees the partnership with IBM, announced in June, as financially and strategically significant for Box, while calling it “the most significant partnership in Box’s history”.

According to the J.P. Morgan report, “IBM is reselling Box and our work shows that this is opening some very large doors with F250 CIOs. The symbolism of a large Content player reselling Box is meaningful, and it creates numerous catalysts beginning in FQ4.”

With the end of the IPO lockup period, Murphy believes that Box’s board members are engaged in buying shares rather than selling them. In addition, the competitive landscape “has actually become more benign.”

With the divestiture of Syncplicity and “the subsequent movement of some executives from Syncplicity to Box, IBM's decision to go to market with Box and the increasing integration between Box and Microsoft Corporation’s MSFT productivity apps should work in Box’s favor,” Murphy said.

Murphy believes that the company is taking steps to improve profitability and is likely to achieve OCF breakeven by 4Q17.