Cloud Computing Stock Builds A Base On Strength Of Expected Profit, Upcoming Earnings

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Cloud computing software firm Box (BOX) is building a cup-with-handle base, underpinned by strong growth ahead of its third-quarter earnings report next week. This recent addition to the elite IBD 50 is Tuesday’s IBD 50 Growth Stocks To Watch pick.


Box provides a software platform that allows companies to manage their content from anywhere on any device.

BOX stock is working on a cup with handle with a 29.57 buy point, according to IBD MarketSmith pattern recognition. Shares are trading well above their 50- and 200-day moving averages, although the relative strength line has turned lower this month. The stock is down 0.2% in moderate volume Tuesday.

The Redwood City, Calif.-based cloud computing firm reports quarterly results on Nov. 30.

FactSet analysts are looking for a profit of 30 cents per share in the quarter ending Oct. 31. If met, the results would mark a 36% profit boost vs. the same quarter last year.  Sales are expected to grow 12% at the same time, to $251 million.

Cloud Computing Stock Profit Seen Growing

The cloud computing upstart has produced a stunning three-year EPS growth rate of 220% and a 97 EPS Rating. Along with other attributes, this has lifted the Composite Rating to 95.

The best stocks tend to have a 95 or better grade as they start a significant move. Keep that in mind when looking for the best stocks to buy and watch.

Analysts like the cloud computing stock as well, with Credit Suisse initiating coverage this month with a buy rating and 36 price target.

Box holds the top spot among its peers in the Computer Software-Database industry group, which is ranked a lowly 152 out of 197 industry groups tracked by IBD. Oracle (ORCL) is the top-ranked stock within the group, according to IBD Stock Checkup.

Software stocks have underperformed the S&P 500 this year. Potential customers are reluctant to spend more on upgrading their software systems, in the wake of high inflation and the threat of a recession.

Given those headwinds, it isn’t surprising the S&P Software & Services ETF (XSW) is down about 35% year to date.

Follow Michael Molinski on Twitter @IMmolinski


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