Entering text into the input field will update the search result below

Box: Foundations Of A Moat Are Forming, Investors Should Still Be Cautious

Aug. 07, 2018 3:55 PM ETBox, Inc. (BOX)10 Comments
Ryan Zentko profile picture
Ryan Zentko


  • Box shares have seen nice growth over the last year, although laced with high volatility.
  • Box's focus on large enterprises allows them to take advantage of customers with complicated IT architectures with several cloud providers.
  • If Box wants to create a moat, it will need to start offering additional products to expand its value offerings to customers.
  • Doing so will allow Box to take advantage of vendor lock-in, or becoming operation critical, which will allow them to begin seeing competitive advantages.
  • Risk-averse investors should wait until Box has released value expanding additions before entering into a position.

Box Inc. (NYSE:BOX) has seen the large share price fluctuations that are typical of growth companies that are not profitable but also around a 15% growth in share price. Valuations for growth companies are not always easy, but valuation is not the first step. Investors need to understand the business model of the company. Is the growth sustainable? What must they do to survive? All of these questions need to be answered for Box.

There is not going to be quick and clear answers for Box. However, I hope to outline how Box has the foundations created to start building a moat and what still needs to be accomplished before risk averse investors should begin to consider valuating and entering into a position.

Customer Base

Box already has their foot-in-the-door for several large enterprises. They support over 85,000 businesses and 69% of the Fortune 500 companies. Large enterprises will be the key for Box to succeed. A study by Veritas suggests that enterprises will continue to rely on multiple cloud providers. Multiple cloud providers are a key factor for vendor-neutral solutions, such as Box. Vendors tend to offer several products that coexist with their cloud, but most of these solutions are only available once you already use their cloud infrastructure, and their add-ons only work for their vendor-specific products. This means a company may need to pay for the same product twice, through two different cloud providers. This allows vendor-neutral Box to survive and grow.

Source: Veritas (Study)

The study also found that customers rely on these cloud providers for data management. However, this should not be the case. Most cloud agreements push these responsibilities on to the consumers, which allows Box to coexist with these cloud vendors. Although the cloud vendors themselves may offer another product for this, Box provides a vendor-free

This article was written by

Ryan Zentko profile picture
Ryan Zentko is an investor with experience writing stock, merger, and financial institution analysis in the academic setting from his time as a student at Georgia Tech and Michigan.

Analyst’s Disclosure: I am/we are long OKTA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.