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Box’s recent earnings report revealed a $5.9 million billings surplus and an acceleration in Remaining Performance Obligations (RPO), growing at 9% year-over-year on a constant currency basis, compared to 8% in the previous quarter. This growth, coupled with a few points from early renewals, indicates a solidifying macroeconomic environment. The company also noted signs of stabilization in the market, similar to observations made last quarter.
The firm’s Net Revenue Retention (NRR) rate appears to have bottomed out at 101%, with expectations to maintain or exceed this level by the end of fiscal year 2025. Citi’s outlook is bolstered by Box’s stable estimates and the introduction of new revenue initiatives, including investments in demand generation, artificial intelligence to drive upselling of Suites, and the introduction of higher-priced product tiers.
Citi’s analysis suggests that Box’s growth story may accelerate, finding the company’s valuation compelling at 12 times its calendar year 2025 enterprise value to free cash flow (EV/FCF) ratio, or 1.8 times EV/FCF/Growth. This is in comparison to its free cash flow-generating peers, which trade at 25 times EV/FCF and 2.7 times EV/FCF/Growth. The revised price target of $32 reflects these positive indicators and the potential for Box’s growth trajectory.
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