Box Slips After Earnings Beat

Quick hit here, friends. After Box, a cloud storage and file sharing shop, reported better-than-expected earnings yesterday, its shares suffered despite a generally positive session for domestic equities.

This is slightly surprising, given that Box enjoyed a healthy multi-point bump in its share price following its earnings report after the bell yesterday. That Box went up after besting expectations, followed by a retreat that grew as large as 5 percent in midday trading, is perhaps confusing.

An analyst price target change from $20 to $17 likely didn’t help.

But there could be more at play. Box reported 43 percent revenue growth and improving margins. However, the company’s cost profile included conflicting profit notes. On a cash basis, Box’s burn decreased compared to the year-ago period. In contrast, its losses measured using normal accounting metrics (GAAP) expanded.

So Box grew, but it lost more along the way. It has long been the presumption that investors value Box on its top-line growth and its cash losses; the method discounts costs that younger companies incur when growing quickly. It could be that investors are vetting Box on stricter metrics, now that its IPO is several quarters past.

I pinged a venture capitalist who has a SaaS focus — fitting for Box, of course — and the investor essentially said that you can beat, and then you can beat. For Box, perhaps it was more former than latter. Without attempting to spread some sort of tin-foil-hat-theory, Box has consistently raised its revenue guidance in recent quarters. It could be that investors are anticipating Box to beat street expectations.

That makes your beat a meet. Box closed the day back below its $14 IPO price.

We track Box not only because it is an interesting company, but because it is a useful proxy for public investor sentiment regarding SaaS companies and technology IPOs in general. This in the context of the Good Technology deal should leave everyone a bit hrrnnggghh.