Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of enterprise cloud storage provider Box (NYSE:BOX) collapsed on Thursday after the company badly missed earnings estimates. By noon, the stock was down more than 15%.
So what: Box reported revenue of $62.6 million for the fourth quarter, a 61% year-over-year increase and a few million dollars higher than what analysts were expecting. Box had an operating loss of $45.8 million, or 73% of revenue, leading to a non-GAAP loss of $1.65 per share. Analysts were expecting a loss of just $1.17 per share.
Deferred revenue grew by 33% year over year, substantially slower than revenue. Billings also rose slower than revenue, increasing just 33%. Box expects revenue between $281 million and $285 million during the next fiscal year, representing a revenue growth rate of around 30%.
Now what: Box continues to lose a tremendous amount of money, and its rapid growth wasn't enough to keep the market happy. Revenue growth is set to slow down during the next fiscal year after growing by 74% during 2014, making the current valuation of around 10 times sales difficult to justify.
At its current pace, Box will blow through the cash it raised from its IPO within a few years. With profitability unlikely in the foreseeable future, and with Box selling what is mostly a commodity service, the market was right to punish the stock today.