Box Inc. (NYSE: BOX) stock has been the most talked about new stocks of 2015.
After setting an offer price of $14 on Jan. 22, Box stock soared 77% in its first day of trading to a high of $24.73 per share.
It's been a very different story for Box stock since that first day, however. Within nine days of hitting the market, Box stock fell 33.6% from its high. Through April 2, it's still down more than 27% at $17.90.
After its huge first-day pop and subsequent pullback, investors have been asking us "should I buy Box stock?"
Here's all the information you need to know about Box, along with the best way to play Box stock now...
A Closer Look at Box Inc. (NYSE: BOX)
The Box IPO raised $175 million when company sold 12.5 million shares for $14 each. The $14 offer price was above its proposed range of $11 to $13 per share, indicating strong demand from institutional investors before the deal.
Box is a cloud-storage company with more than 25 million registered users. It works with more than 45,000 companies globally, and counts more than 50% of the Fortune 500 list as clients. Some of its biggest customers include Astra Zeneca Plc. (NYSE: AZN), General Electric Co. (NYSE: GE), and eBay Inc. (Nasdaq: EBAY).
But the company offers more than just cloud storage. It also provides its customers with secure file sharing, enterprise security, file synchronization, and management services.
CEO Aaron Levie has also told investors the company plans to differentiate its products based on industry.
"We're starting to see that in each industry, the way you use data, the way you use information, the really transformational ways you use the cloud tend to be fairly different," Levie told The Wall Street Journal.
Specifically, Levie wants Box to become a major player in the healthcare and retail industries.
Box reported earnings for the first time as a public company on March 11. Revenue was $62.6 million for Q4, which was an increase of 61% from the previous year. That 61% growth was down from 70% in the previous quarter and 81% the quarter before that.
According to Money Morning's Defense and Tech Specialist Michael Robinson, slowing revenue growth is not a huge concern right now. It is difficult for any company to maintain 80% revenue growth quarter after quarter.
However, he says there are two major problems with Box that make investing in Box stock a risky proposition now...
Why Box Stock Is Not a Buy
The first major issue is competition.
One of its biggest competitors, DropBox, is reportedly close to an IPO. DropBox focuses more on individual customers than Box, but they do share many of the same services.
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DropBox is also much larger. It's currently valued at $10 billion. Box has a market cap of just $2.1 billion right now.
It isn't just startups that are challenging Box...
Google Inc. (Nasdaq: GOOG, GOOGL) offers the "Google Drive" service, which allows users to store up to 15 GB for free.
Microsoft Corp. (Nasdaq: MSFT) has been upgrading its "OneDrive for Business" product to directly compete with Box and DropBox. Amazon.com Inc. (Nasdaq: AMZN) also entered the space with its Zocalo service.
"I'm a big believer in the cloud- there is a lot going on in the cloud industry," Robinson said. "But I'm already with Apple for a small monthly fee. What is Box going to do to take me away from these other companies?"
Another major concern is the company's image.
Many view the firm as purely a cloud-storage company, despite Levie's attempts to brand the company as much more.
"The issue they have is they're branded as a storage company when they offer other products like file sharing and security," Robinson said. "This is a broadly based company with multiple revenue streams. But they need to convince Wall Street of that. It will really take two quarters for them to change the perceptions out there."
For those reasons Robinson does not recommend Box stock for retail investors. It's too risky at the moment, and he generally tells investors to avoid new stocks for at least six months.
However, he does have a strategy for aggressive investors.
"For very aggressive traders there is a way to make money," he said. "There were two bases that formed earlier this year. The first was between $18.50 and $19.50. Then it set up a new base around $17. There was an attempt at a breakout but it fell from there."
"I would look for an entry point at a staggered basis around $16.50. But this is only for aggressive traders in the high-risk portion of their portfolios. If the stock falls another 20% below that entry point that would be a second buy opportunity. It has not traded below $16.50 since February and that tells me you've got support around that point."
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