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Shares of Box Inc. had their biggest daily percentage gain this year Monday, after Morgan Stanley analysts said the cloud-storage platform was “underappreciated” and is holding up despite a wobbly economic backdrop and tightening tech budgets.
Box’s
BOX,
stock jumped 9.2% to $26.63 on Monday, its biggest gain since Dec. 1, 2021, when the stock rose 10.3%. Box is up 2% for the year so far, thanks to Monday’s advance. By comparison, the S&P 500 index
SPX,
is down 23% year-to-date, although it was up 3% on Monday.
The Morgan Stanley analysts said Box had managed to hold on to customers, and were well-equipped to weather any tech-spending cutbacks.
“Recent results demonstrating higher net retention, lower churn, and strong large deal momentum, with consistent execution across geographies, customer sizes and verticals, suggest Box’s Suite selling and expanding product capabilities are allowing customers to more easily realize the value of the full Box platform — key in a challenging macro,” the Morgan Stanley analysts wrote, while upgrading shares of Box to the equivalent of buy from neutral, and raising their price target on the stock to $34 from $32.
The analysts made the upgrade, they said, as IT managers try to decrease their spending on software. Box executives last month, during the company’s most recent earnings call, said they hadn’t seen any “pronounced” impact on demand as risks of a downturn loom, the analysts noted.
However, the executives at that time noted that Box’s customers were still “dealing with the broader macro challenges.”
The Morgan Stanley analysts admitted that Box wasn’t immune to those difficulties, but they said Box stood to benefit as customers try to manage costs because it raises the likelihood that those customers will move toward “platform-focused” software that can serve customer needs without costly network infrastructure.
“We view customers’ increased focus on driving cost and (return-on investment) efficiencies (i.e. consolidating point solution spend, moving away from legacy vendors, removing costs associated with maintaining expensive internal infrastructure) translating to stronger positioning of Box’s broad content management platform, allowing them to better weather macro impacts and continue to execute through potential headwinds,” the analysts wrote.
Eight of the 13 analysts who cover Box shares have a “buy” or equivalent recommendation on the stock, according to FactSet tracking, while the other five rate it the equivalent of a “hold.” The average price target on the stock as of Monday was $33.14, roughly 24.4% higher than the going rate.
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