Box, Inc. (BOX) shares fell more than 5% during Wednesday's session, despite the Software-as-a-Service company reporting better-than-expected third quarter financial results.
Key Takeaways
- Box shares fell more than 5% during Wednesday's session despite better-than-expected third quarter financial results.
- Wells Fargo defended the company following its earnings announcement, reiterating its Overweight rating and assigning a $25 price target.
- Technical indicators are mixed following the move lower, but traders should watch for consolidation and a rebound higher from support levels.
Revenue rose 10.6% to $196 million, beating consensus estimates by $1.73 million, and non-GAAP earnings per share (EPS) reached 20 cents, beating consensus estimates by six cents. In addition to the favorable results, free cash flow turned positive, and fourth quarter and year-end guidance came in at or above consensus estimates.
Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the non-cash expenses of the income statement and includes spending on equipment and assets as well as changes in working capital from the balance sheet.
Wells Fargo defended the company following the earnings announcement, maintaining its Overweight rating and $25.00 price target on the stock. The analyst said that third quarter revenue, margins, earnings, and software billings all came in at or above expectations, represents a reassuring step in the right direction.
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From a technical standpoint, the stock fell sharply lower to its 50- and 200-day moving averages at around $17.00. The relative strength index (RSI) fell to neutral levels of 49.29, and while the moving average convergence divergence (MACD) fell a bit, the indicator remains in bullish territory. These indicators suggest that the stock could see some near-term consolidation, but the bull base remains intact at the moment.
Trader should watch for consolidation near the 50- and 200-day moving averages at around $17.00 over the coming sessions. If the stock rebounds, traders could see a move to test trendline resistance at $19.00. If the stock breaks down from these levels, traders could see a move to retest prior lows at $15.00 or trendline support at $14.50, although that scenario appears less likely to occur at the moment.
The Bottom Line
Box shares fell more than 5% during Wednesday's session despite the company posting better-than-expected third quarter financial results. With technical indicators still in bull territory and Wells Fargo analysts defending earnings, traders should watch for some consolidation around support levels at $17.00 before the stock resumes its trend higher.
The author holds no position in the stock(s) mentioned except through passively managed index funds.
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