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Is Box Stock Cheap after Tanking 20% on Weak Revenue Growth?

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Box’s revenue grew 20% in the January quarter

Cloud software provider Box (BOX) shared its fourth quarter of fiscal 2019 reports on February 27. The company’s stock slid nearly 20% the next day as the company’s revenue growth slowed, giving bleak guidance for the first quarter of fiscal 2020 (ending April 2019).

Box reported revenue of $163.7 million in the first quarter, up only 20% from the same quarter last year. The midpoint of the company’s revenue forecast for the current quarter is $161.5 million, which would only represent a 14.5% year-over-year growth.

The company said the main drag on the fourth quarter was an inability to close big deals. These failures typically dampen growth rates.

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Box was unable to close big contracts

In the fourth quarter of fiscal 2019, Box was only able to close two deals worth $1 million or more, much lower than the nine such deals the company closed in the same quarter the previous year. This change obviously dragged the growth rate down.

Box is increasingly targeting the enterprise segment, where contracts might take longer to close, which probably affected growth in the fourth quarter and the guidance for the first quarter. However, once Box closes these deals, the company could return to its normal growth trajectory.

Box posted a net loss of $19.7 million for the fourth quarter, or $0.14 per share, compared to $0.24 per share in the corresponding quarter of the previous year. The 20% decline the Box’s stock might be an overreaction, so it could offer a good entry point.

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