On Wednesday, Citi maintained its Buy rating on Box, Inc. (NYSE:BOX) and increased its price target to $40 from the previous $34. This adjustment reflects a positive outlook on the company's future financial performance.
The analyst highlighted Box's consistent revenue growth, reporting a 6% year-over-year increase on a constant currency basis, and a significant outperformance in Remaining Performance Obligations (RPO), which saw a 14% year-over-year growth, also on a constant currency basis.
Despite a slight shortfall in billings, the company's strong RPO figures suggest a robust demand environment. According to InvestingPro data, Box has demonstrated strong momentum with a 34.4% year-to-date return and currently trades near its 52-week high of $35.74. Seven analysts have recently revised their earnings estimates upward for the upcoming period.
Box's earnings revealed a mixed performance, with a minor billings miss attributed to a $2.5 million shortfall against the backdrop of a roughly $3 million foreign exchange impact. However, the enterprise cloud content management company's RPO, which is a measure of future revenue, exceeded consensus expectations.
The analyst pointed to a generally stable demand environment, with particular strength in the Japan and U.S. enterprise sectors, although there was some continued pressure in the small and medium-sized business (SMB) segment.
InvestingPro analysis shows Box maintains impressive gross profit margins of 76.8% and has achieved an overall Financial Health Score of "GREAT," with particularly strong scores in growth and profitability metrics. Subscribers can access 12 additional ProTips and comprehensive financial analysis in the Pro Research Report.
The report from Citi also touched on the discrepancy between the growth in RPO and bookings versus the lower single-digit growth in billings. This difference raises questions about the company's setup for fiscal year 2026.
Nonetheless, the analyst expressed confidence in Box's positioning for accelerated growth, supported by the introduction of its new Enterprise Advance tier, which could lead to a 20-40% pricing uplift, and Box AI, which is expected to contribute to a recovery in Net Revenue Retention (NRR).
Citi's continued endorsement of Box is based on the company's current valuation, trading at 16 times its calendar year 2025 enterprise value to free cash flow (EV/FCF), coupled with the potential for an emerging AI narrative and further acceleration in growth. The revised price target of $40 is founded on a 16 times multiple of the company's fiscal year 2027 EV/FCF.
With a market capitalization of $4.93 billion and annual revenue of $1.06 billion, Box has achieved a balanced financial profile. InvestingPro's Fair Value analysis indicates the stock is currently trading at fair value levels, making it an interesting watch for investors seeking exposure to the enterprise software sector.
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