Shares of Box (BOX) gained over 10% in early market trading on September 4. The stock surged after activist investor Starboard Value revealed that it held a 7.5% stake in the company.
According to a CNBC report on September 3, “Starboard is now the third largest shareholder after Vanguard and BlackRock. Starboard has previously taken ownership positions in tech companies including Marvell, Symantec and Yahoo.”
Starboard hasn’t disclosed its intentions for increasing its stake in Box. But generally, activist investors want to gain a board seat so that they can make wholesale changes within a company.
Box refused to comment on its interaction with Starboard. The company, however, released a press release stating that its management would continue to focus on increasing shareholder value.
Is profitability a concern for Starboard?
While Box has managed to grow its sales at a robust rate over the years, the company still reports a generally accepted accounting principles loss. It has increased its sales from $400 million in 2017 to $608 million in 2019. Analysts expect its sales to increase 13.6% to $691 million in 2020 and 12.4% to $776.33 million in 2021.
In comparison, analysts expect the company’s net margin to improve from -21.2% in 2020 to -17.3% to 2021 and -9.7% in 2022. One of the reasons for Starboard’s investment in Box could be that it wants to focus on improving the company’s bottom line.
Starboard has stated that it believes Box stock is undervalued at its current price and provides an “attractive investment opportunity.”
Box stock has underperformed the markets in 2019
Shares of Box are trading at $16.6 and have fallen close to 10% year-to-date despite their recent rally. Box slumped close to 30% between June 20 and August 14. Overall weakness in the market and fears of a slowdown in tech spending negatively affected the stock.
The company was publicly listed in January 2015, and it’s been volatile since then. The stock fell from $23.2 per share in January 2015 to $9.4 in February 2016. It then rose to $28 in June 2018. The stock is currently trading below its IPO price. Box is trading 35.4% below its 52-week high.
Analysts have a 12-month target price of $17.1 for Box, indicating a potential upside of 3% from its current price.