What happened
Shares of data management company Box (BOX 3.21%) got knocked down today after the company reported financial results for its fiscal second quarter of 2024. Q2 results were actually slightly better than expected, with revenue up 6% year over year to $261 million and an operating margin of 4%. But that's not what investors are most concerned with.
With its Q2 report, Box also lowered its full-year guidance. And that's why the stock was down 10% as of 9:50 a.m. ET.
NYSE: BOX
Key Data Points
So what
Commentary from Box's management was similar to what investors have heard from other data storage companies. Enterprises aren't budgeting as much for these services as expected, opting to get more out of what they're already paying for. And this is putting pressure on growth rates for these businesses, including Box.
Given the ongoing headwinds in the industry, several prominent analysts are lowering their price targets for Box stock today, which is another reason the stock is falling.
Now what
For fiscal 2024, Box expects to generate revenue just north of $1 billion, which would be good for 5% year-over-year growth. This is a slight deceleration from its 6% growth in both the first quarter and second quarter. And it's slightly lower than its previous full-year guidance of 6% growth.
Box also lowered its full-year profit guidance. Previously it expected an operating margin of 5% but now only anticipates an operating margin of 4.5%.
If there's a silver lining here, it's that Box is profitable and is returning cash to shareholders via share repurchases -- it just added $100 million in repurchase authorization. A lower stock price will allow management to repurchase more shares.
The bigger issue, however, is that Box has been a low-growth business for a while. For the stock to beat the market from here, its growth will likely either need to accelerate or its margins will need to expand much further. Neither is happening right now, which may be good reason for investors to wait on the sidelines.
