Is Now The Time To Buy Box Stock?

  • Box has developed a niche in enterprise collaboration.
  • The numbers are frightening, but the niche is rich in potential and Box could find big suitors.
  • Is Box stock a good speculative play now?

The purchase of UStream by IBM (NYSE:IBM), and the dire financial straits of small cloud-based companies, puts a spotlight on Box (NYSE:BOX) as a stock to buy for a buy-out. After a 50% fall in the stock price, is now the time to buy Box stock?

BOX stock chart

Source: BOX stock price chart by

Box originally rose to prominence for its simple cloud storage business model, but that quickly became commoditized and its second act is more promising. Box now bills itself as a content management and collaboration platform, developing new types of workflows and focusing on services for enterprises. It even opened an office in New York City.

Box continues to have a negative bottom line, however. For the quarter ending in October it lost 45 cents per share.

BOX EPS chart

Source: BOX EPS chart by

For the next quarter, ending this month, it’s expected to lose another 41 cents per share.

All this remains possible, in part, because Box has enough cash, $152 million, to continue sustaining losses, at the current rate, for some time. It could also tap debt markets, having just $1 in debt for each $10 in assets currently.

What is of most interest to speculators, however, are its growing relationships with both Salesforce (NYSE:CRM) and IBM. With Salesforce it has created new content management solutions. With IBM it has announced a host of initiatives, described in a recent press release as a strategic partnership.

To both these companies, Box is worth far more alive than dead. Storage systems, the manipulation of storage in real time along with processing, is becoming an important niche within the greater cloud market, and Box is addressing these opportunities at a price that both Salesforce and IBM find quite acceptable – practically free.

Still, Box would be a snip for either of these companies – or one of their competitors – to buy. If Oracle (NYSE:ORCL) made a move for Box, as part of its own expansion in the cloud, Salesforce would be forced to respond. Given its market cap of $1.36 billion, Box could sustain a rather extreme bidding war that wouldn’t break the bidders at all.

Collaboration is an important way-station on the way to a company moving all its operations to a cloud system. If your partner is in the cloud, then you need cloud storage to work with them. Box has developed an important niche in this area, and that niche can be used by a buyer of Box to move its customers into their cloud.

The year 2016 is the year when enterprises get dead-dog serious about moving all their operations, and applications, into the cloud. This has been said before, but everything points to a new serious intent in boardrooms on this subject. As this move progresses Box is in a sweet spot, one that it can get into for a price that, in cloud terms, looks like a snip. Box stock could be a good speculative play here.

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  • I do not hold any positions in the stocks mentioned in this post and don't intend to initiate a position in the next 72 hours
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  • I do not have any business relationship with the companies mentioned in this post.
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