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Why Is Box (BOX) Stock Soaring Today

StockStory - Mon Mar 4, 2:13PM CST

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What Happened:

Shares of cloud content storage and management platform Box (NYSE:BOX) jumped 8.5% in the morning session after the S&P Dow Jones Indices announced that the company would join the S&P SmallCap 600 index before the start of trading on Monday, March 18, 2024. The S&P 600 index tracks small-cap stocks with a market cap of $850 million to $3.6 billion. Being included in the index means that it will likely be held by many mutual funds and ETFs, which could potentially drive up demand for the stock. We note that while buying of the stock could increase, this development does not change the fundamentals of the company. Revenue growth, expense efficiency, and capital intensity of the business, for instance, are not impacted by index inclusion or exclusion, so this is more of a technical tailwind for the stock.

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What is the market telling us:

Box's shares are not very volatile than the market average and over the last year have had only 2 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 6 months ago, when the stock dropped 12.3% on the news that the company reported second quarter results that missed analysts' expectations for billings, though revenue and earnings per share (EPS) came in ahead. Looking ahead, revenue and non-GAAP operating profit guidance for next quarter underwhelmed. Full-year revenue guidance was slightly lowered and also missed Wall Street's estimates. Lastly, non-GAAP operating profit for the full year was also below expectations. Management hinted at the drivers of the weaker near-term outlook, adding that "While ongoing economic factors have affected our customers' IT budgets and put pressure on our projected fiscal 2024 growth rate, we remain committed to our long-term revenue growth targets as we continue to drive gross margin and operating margin expansion in FY24 and beyond." 

Overall, the results could have been better. Following the results, Craig-Hallum analyst Chad Bennett downgraded the stock's rating from Buy to Hold (Neutral).

Box is up 8.1% since the beginning of the year, but at $27.89 per share it is still trading 11.7% below its 52-week high of $31.57 from July 2023. Investors who bought $1,000 worth of Box's shares 5 years ago would now be looking at an investment worth $1,429.

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