Box Is Working Against Its Own Plans: JPMorgan Downgrades To Neutral

JPMorgan's Mark Murphy downgraded Box Inc (NYSE: BOX) to Neutral from Overweight and a price target of $14.00 from $18.00. The downgrade came after the company reported weak earnings Wednesday.

Due to missing estimates, Murphy said it was likely the stock doesn't move in upwards or downwards significantly in the near future. "We believe that the stock could trade sideways in the near-to-midterm," said the analyst.

Murphy did, however, appreciate the following with Box's earnings report:

• Faster than expected margin and cashflow improvement
• Expanding product line that "could increase stickiness of the product"
• An "intensifying" M&A environment

Related Link: 3 Things That Would Make Morgan Stanley More Positive On Box

The analyst wasn't impressed on all fronts though: "We see less top line upside than previously expected." Downside and "challenging optics" include:

• "Shifting billings terms for multi-year prepays to annual terms," understating reality of business this year"
• Net expansion sales of 19 percent from 30 percent one year ago, 20 percent below the analyst's expectations
• Larger deals are becoming more seasonal and they are declining in number

Due to these concerns, the analyst believed Box is working against what made the company a great competitor in the first place. "Overall we believe that Box is executing reasonably well against its plans to become the leading enterprise content management platform," stated Murphy.