Thursday, August 27, 2020

Box Shares Skyrocket on Rising Cloud Storage Demand

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News shaping
the markets today

     

What’s happening: Shares of Box Inc. surged in extended trading on Wednesday after the cloud storage and file sharing software company reported upbeat fiscal second-quarter results and issued a strong forecast.

What happened: Box joined the list of tech companies benefitting from the digital transformation of businesses to support a remote workforce due to the pandemic.

Not surprisingly, investors rewarded the company for the beat-and-raise quarter. But what has really lifted sentiment is expectations of the work-from-home (WFH) shift being a secular trend and the cloud storage market crossing $100 billion by 2023.

How were the results: Box reported sales growth and a narrower net loss for the second quarter.

  • Revenue grew 11% to $192.3 million, from $172.5 million in the same quarter last year, beating the consensus view of $189.6 million.
  • The company posted a quarterly loss of $7.65 million, or 5 cents per share, versus a loss of $36.2 million, or 25 cents per share, in the year-ago quarter.
  • Adjusted earnings rose to 18 cents per share, from hitting breakeven in the second quarter last year, surpassing the consensus estimate of 12 cents per share.

Why it matters: Box’s quarterly results were announced a day after Salesforce released stronger-than-expected earnings, as businesses are increasingly connecting with employees and customers through the digital mode.

CEO Aaron Levie had been under immense pressure from the company’s stakeholders to improve profitability. This was achieved in the second quarter with growing sales and a focus on cost discipline.

Box, which has been trying to sell new products to its users, announced a partnership with the Google cloud platform.

Expecting the company to continue benefiting from the secular WFH shift, management raised the revenue guidance for the full year from a range of $760 million and $768 million to between $767 million and $770 million. The projection for adjusted profits was also raised to between 56 and 60 cents per share.

For the current quarter, Box issued its revenue forecast in the range of $193 million and $195 million, ahead of the consensus expectation of $192.79 million. Earnings were projected in the range of 13 to 15 cents per share, beating the consensus view of 12 cents per share.

How shares responded: Shares of Box spiked more than 14% in after-hours trading, after climbing 7% during the regular session. The stock has gained 15% year to date, outperforming the S&P 500, which has risen 7.7% in the same period.

What to watch: Investors are bullish about the company’s prospects. The market will keep a close eye on Box’s performance in the SMB (small- and medium-businesses) space, which has been a soft area for the company, as it focuses on large enterprises.

The Markets Today

     

US stocks will be in focus today, ahead of the much-awaited speech by the Federal Reserve Chairman.

Context: US stocks closed higher on Wednesday, with the S&P 500 and Nasdaq 100 clinching new record highs, powered by tech and ecommerce companies.

Details: Investor sentiment was boosted by a decline in the number of covid-19 cases in the US along with progress in treatments and vaccines for the virus.

US economic data also came in better than expected, with orders for durable goods rising 11.2% in July, versus projections of a 4.8% gain.

The S&P 500 notched its 18th record finish of 2020, rising 1% to close at 3,478.73 on Wednesday. The Nasdaq 100 jumped 1.7% to settle at 11,665.06, securing its 39th record close for the year. The surge in the tech-laden index was driven by shares of Amazon, Tesla and Netflix.

Salesforce’s stock spiked around 26% on Wednesday, after the company reported stronger-than-expected results for the latest quarter. Shares of Dick’s Sporting Goods jumped around 16% after the retailer reported a whopping 194% growth in ecommerce sales for the second quarter.

The Dow Jones index climbed 83.48 points to close at 28,331.92 on Wednesday.

What to watch: Investors will keep a close eye on Jerome Powell’s speech at the Jackson Hole economic symposium, at which the Federal Reserve Chairman is expected to announce further steps for the country’s monetary policy.

Investors also await reports on GDP growth, initial jobless claims, pending home sales and Kansas City Fed's manufacturing production. Economists project a 32.5% contraction in the US economy for the second quarter. Initial jobless claims are expected to decline to 1 million in the week ending August 22, from 1.1 million in the prior week.

Markets will continue to monitor the covid-19 numbers, with total cases surging to 5.8 million in the US.

Other Markets: European indices were trading lower at 8:30am GMT, with the FTSE 100, French 40 and Dax 30 index down by 0.3%, 0.2% and 0.1%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Mexico’s balance of trade and monetary policy meeting minutes, Canada's current account and average weekly earnings, Russia’s business confidence and corporate profits, Saudi Arabia’s money supply M3 and bank lending growth, Argentina’s consumer confidence as well as the US EIA’s natural gas stockpiles.