Cloud storage company Box’s IPO is a success by all measures. Priced originally at around $14, Box (NYSE:BOX) shares finished its first trading day at $20.20 – a nice 44% pop. Indeed, some analysts are already comparing Box to Twitter: both experienced delays launching IPOs, both don’t expect to turn a profit anytime soon, and both enjoyed a nice pop in price when they launched. Sadly, given Box’ business fundamentals, Box might also share Twitter’s post-IPO fate. Primarily, Box officer might experience a lot of uncertainty and challenges as they seek to increase revenues as well as position their company in an increasingly competitive market.
When it comes to competition, Box is operating in some really choppy and uncertain waters. First, it is offering online storage services. Not exactly a revolutionary idea regardless of how great Box’ software interface and process may be. After all, no less than corporate giants Microsoft and Amazon are already in the lucrative cloud computing space. Amazon Web Services, in particular, poses a serious risk due to its huge market share. It wouldn’t be surprising if Amazon decides to build out its existing service offerings to offer large-scale cloud storage in addition to content distribution. The most menacing threat to Box is the anticipated IPO of rival Dropbox which offers a very well-balanced and seamless cloud storage option for both businesses and consumers alike. It has a huge installed base.
Given all the threats above, why buy Box? The biggest advantage Box has is its huge base of corporate customers. According to Box, 99% of Fortune 500 companies are Box customers. Close to half of those Fortune 500 companies pay for their service. It’s only a matter of time until we learn whether this is enough of an advantage to stay relevant in Box’s space. Don’t be surprised if this company gets acquired by another public company. It might not have enough to offer to stay a stand alone company.
