Box Falls After Billings Growth Slows, JPMorgan Downgrades

Box Inc., a seller of cloud-based storage software, fell the most in almost four months after reporting decelerated billings growth that missed analyst estimates.

JPMorgan Chase & Co. analyst Mark Murphy downgraded the stock to neutral, citing concerns over Box’s strategy of shifting from multiyear prepaid terms to annual contracts, fewer customers making add-on purchases, and an increasing number of deals being done toward the end of the year, increasing the seasonality of the business.

“We see less top-line upside than previously expected and challenging optics this year,” he wrote in a note Thursday.

Billings for the first quarter of fiscal year 2017 were $75.9 million, a 9 percent increase from a year earlier, the company said late Wednesday. For the same period the previous year, billings gained 58 percent. The metric, which is the sum of revenue and change in deferred revenue, helps investors understand total deals done over the quarter and serves as a proxy for future sales growth, said Mandeep Singh, an analyst at Bloomberg Intelligence.

Box executives attributed the slowing growth to “seasonality and change in payment duration,” Singh said. “While everything else was in-line with consensus, a billings miss usually hurts a cloud company’s stock in the near-term.”

The shares fell as much as 11 percent in early trading in New York, the most intraday since February, and were down 10.2 percent to $11.50 at 10:00 a.m. The stock lost 8.2 percent this year through Wednesday.

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