Box IPO Brings Hype, But Long-Term Growth Remains Challenged
On Friday, one of the most highly anticipated IPOs of the year hits the market as cloud storage company Box hopes to raise at least $138 million through a 12.5 million share public offering. The company should trade higher in the near-term, but long-term outperformance will be hard to come by. There's no question the stock will experience a huge pop right out of the gate. Investors love their tech IPOs, and this is one of the more exciting ones to hit the tape in quite some time. Longer-term, however, TheStreet's Jack Mohr has some reservations. Even though cloud storage is undoubtedly a high growth business, the market has become increasingly commoditized, as Google and Microsoft offer similar solutions at lower prices. Box's customer lineup is impressive, however, featuring nearly half of the companies in the Fortune 500. Box's edge is its ability to offer the rare combination of security and consistency. But that's likely not enough to propel the company to sustained growth as the market becomes increasingly crowded and the competitive pressures continue to drive prices lower. Given its solid growth profile, Mohr says he would be to pay up to 6 times sales for Box, which would imply a price tag of $17.50. Anything above that is just chasing the hype.
