NEW YORK (TheStreet) -- Whether on public or private clouds, corporations are now more willing to make their data better accessible to both employees and their customers. It's not just for convenience. They also save money, thus boosting profits and, ultimately, their stock prices.
After January's strong initial public offering, which saw BOX shares rise more than 40%, the Los Altos, Calif.-based company has seen its stock struggle, losing more than 24% over the past six months. With shares now trading around $17, Box is down almost 30% from its high of $24.73 reached on Jan. 23.
So ahead of the company's first-quarter fiscal 2016 earnings results Wednesday, there are several factors investors must consider before placing a long bet. And none of them suggests that shares will climb meaningfully in the near term.
Why? The company has spent money on multiple acquisitions recently, all of which will require time to create operational synergies. This is likely to prolong the period before Box starts making the money the market has bet that it will. And delays are not what investors should want from a company that posted annual sales of $216 million in the last fiscal year.
This means at around $17 per share, Box is currently valued at almost 10 times revenue, compared to, say, Microsoft (MSFT), which is valued at just four times revenue.
Granted, Microsoft may not seem like a fair comparison, but purely based on Microsoft's commercial cloud business, which has grown at better than 100% annualized rates for six straight quarters, it relates to how one assesses the value of Box shares. For that matter, even Amazon -- a notoriously expensive stock -- is valued at just two times revenue. And Amazon recently revealed that its dominant AWS cloud business has revenue run rate of $5 billion.
Complicating matters for Box, its sales and administrative expenses -- totaling $269 million in the last fiscal year -- are climbing at a 27% rate. This means sales and administrative expenses are 24% higher than annual revenue. Again, that's not a surprise given that the company's still relatively young.
So is Box, which is projected to post a loss of $1.19 per share for the current fiscal year and a loss of 87 cents next year, a worthwhile investment today? I don't think it is -- not when there are better cloud investments like Microsoft and Google that are already making money.
While there's nothing wrong with Box's "If we build it, they will come" mentality, not every quality cloud service that emerges will be a hit. And with research firm IDC projecting that spending on cloud-based Big Data and analytics solutions will soar over the next five years, it doesn't make sense to bet on the long shots and ignore the seemingly sure things like Google, Amazon and Microsoft.