It appears that bears who were negative on the recent IPO of cloud storage company Box (NYSE:BOX) hit the nail on the head. Box stock has fallen by 18.97%. This is quite substantial considering the fact that it took place in a very short period of time. It’s less than a month and short investors are already enjoying this rate of return, not bad. The best part of it all is that if you have any level of skepticism in you, this should have been an easy call to make.
Box, for all its hype and promise, is playing in a commodities market. Cloud storage is a race to the bottom. While Box’s ace in the whole is its strong portfolio of corporate clients, it’s only a matter of time for cheaper and well-healed competitors like Microsoft and Amazon to put a strong play for those corporate clients. I don’t see much upside for Box unless it truly offers a different value proposition other than playing in the same generic cloud storage market. It truly is a race to the bottom.
As long as its overall strategy remains the same, Box will remain a Good bear Stock. Moreover, Box is already under performing when the stock market is going crazy. Imagine its fate when the overall market hits a more realistic level of valuation. All bets are off at that point in time. Unless it can get its act together fairly quickly or if there is yet another round of quantitative easing or some sort of extraordinary Fed measure, expect weaker stocks like Box to feel some downward pressure in the short- to mid-term.
