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Box Inc: The Hidden Winner of the New Economy

I’m coming at you with another hot pick. In my last DDs, I gave y’all New Relic and Activision as two picks that would give huge returns. I think the potential Box Inc. shows for gaining upward momentum is even greater than the previous two. Below I will make the case for why Box is a good investment.
What Do They Do?
Box Inc. is a cloud content management and file sharing service for businesses. It was founded in 2005 and is supported on various platforms like Windows, macOs, and mobile.
Box Competitors
The main competitors for Box are Dropbox, Google, and Microsoft. The downside risk from Box stems from the fact that Google and Microsoft are willing to deliver the services Dropbox and Box offer for very cheap, which makes the landscape a bit challenging. However, that said, Box Inc. is uniquely positioned to be an enterprise play while its most similar counterpart Dropbox is mostly for individual consumers.
Why Box Inc. is a Good Play Right Now?
Box Inc. is an excellent play right now because it has been struggling these past few years to show sustained growth in revenues. However, the pandemic has become the catalyst that Box needed to accelerate the company to its next stages. Below you can see my reasons:
  1. Dropbox has seen large growth by users in the business space. However, Box is truly the enterprise play as I mentioned earlier and to me the continued growth as seen in Dropbox’s last earnings call (18% y/y) is promising for Box as well. I am simply convinced Dropbox and Box are in a space that is growing a ton. The biggest takeaway I took from Dropbox’s most recent earnings report is that Dropbox Business Team was the fastest growing part of their business starting from March, the beginning of quarantine, with a 40% increase in Business Team trials www.blog.dropbox.com/topics/company/dropbox-by-the-numbers-in-q1-and-early-q2. I can’t even imagine or even accurately guess what the enterprise solution for cloud file system management Box is posting in growth if Dropbox, the consumer play, is posting those numbers. That Dropbox link I posted above is definitely worth a read especially considering Box has all these same integrations that Dropbox has plus more, which is an additional thing that makes it an even more attractive investment. You can see some of Box’s integrations here: https://www.box.com/partners?utm_source=Google&utm_medium=SEM&utm_campaign=DM-Google-SEM-NA-ENG-Brand&utm_keyword=box%20integrations&id=7010e000001PaCy&utm_content=217155712240|kwd-332756340892|c&gclid=Cj0KCQjwnv71BRCOARIsAIkxW9HKhQ-3qQCL9J1xUCNYI51JIpRRs1lqkw8tQiF_5CUtnPmyyy27_q0aAg-kEALw_wcB.
  2. Box supports 68% of Fortune 500 companies (www.box.com/customers) which you can find straight off their website. This is important to note because Box charges businesses per user per month unless it’s a massive account as you can find here: www.box.com/pricing. As more companies continue letting their employees work from home and get them on-boarded on their remote infrastructure, Box will gain users with their existing customers, people who previously were not given Box access. On top of that, Box will gain more company sign-ups as remote work becomes more prevalent, and I think the next earnings report will start to show the full picture of the favorable positioning Box has gained.
  3. It’s hard to leave the Box ecosystem. This is important because it mitigates risk of company’s leaving Box for a cheaper competitor. Autists doubted my vibes when I said New Relic was going to kill it, but contrary to popular belief, changing technologies and services isn’t something that just happens overnight. It’s a gradual process and one that Box has made very difficult since their platform has so many custom add-ons and is tailored to specific companies.
  4. Box is seen as the secure solution by many companies. I know for a fact that the talent at Box is incredible, and the product they have is also equally great. Security is very valuable, and companies are willing to pay premiums to make sure the information that they are sharing over the cloud will not be leaked or exposed. Box even has products within the ecosystem that can make things more secure such as Box Shield, which helps prevent data leaks by allowing admins to add security controls to content. On a side note, the plugins Box has continued adding to their ecosystem has created a great opportunity for additional revenue.
  5. Box is one of the companies that immediately benefits from remote work and will have lasting gains from the new economy. But even better, Box is also a part of the tools that make collaboration possible for teams and in immediate demand now like Zoom and Slack. I think it is possible that people will not notice Box’s potential until an earnings call or two once their growth rate is outpacing the conservative one management had previously outlined in Q4 earnings (11% revenue growth).
Acquisition Target?
I’m going to make a case for getting long calls here. Simply, I can see a world where Box is acquired by Microsoft. Right now, Box is a growing company that has learned to monetize an industry that Microsoft has continuously shown interest in penetrating. A Microsoft and Box pairing would be super successful but also means Microsoft would probably pay a premium to acquire Box as well. What makes this an even bigger possibility in my opinion is activist investor Starboard Value taking three Box board seats (https://techcrunch.com/2020/03/23/activist-investor-starboard-value-taking-three-box-board-seats-as-involvement-deepens/). Starboard is on the Board of Box to help raise the stock price, and as of right now, it seems like it is a collaborative effort between management and Starboard rather than throwing out leadership or doing a complete takeover, something activists are usually more well known for doing.
Microsoft can make that sad balance sheet Box has and help the business scale to a healthier state that would give Dropbox and Google a run for their money. In addition, Box already integrates with Office 365, so in my opinion, this is a pretty painless integration into the Microsoft ecosystem of products. To be clear, this is one of the things I have considered and is probably overly optimistic. Nonetheless, the pandemic is still giving Box incredible growth and that should remain as the main driving factor for investing.
Financials
There’s a lot to dig in here, but I think the elephant in the room is the massive amount of debt Box carries. However, I’m not too concerned as management has addressed ways to reduce this which you can reference their last earnings call, and I believe management is more focused on solidifying their place as the enterprise leader in this industry. Basically, this business was built to reduce debt and COGS a ton as its revenues scale.
Conclusion
I cannot see a scenario where Box loses, and I see them as a long-term winner. Long calls are safe to avoid any catastrophe the broader market brings and even better because Box contracts are cheap. The key here is buying at the right time and let earnings sink in for folks so they realize the massive potential box has.
tldr: Long calls on Box to make the ultimate gains.
EDIT: Forgot to share this, but Starboard raised their stake in Box 60.5%: https://www.reuters.com/article/brief-starboard-value-lp-raises-share-st-idUSFWN2CX146
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submitted by throwawayacct9919 to wallstreetbets

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submitted by s5ean to microsoftsoftwareswap