Boxed (NYSE:BOXD) is an e-commerce retailer and provider of e-commerce platform services. It has recently expanded its Spresso business in the USA and Vietnam market, increasing its potential customer base. I believe these expansions can act as a growth factor for the company in the coming years.
The company is an e-commerce retailer and provides e-commerce services. The company offers bulk pantry consumables to corporates and household consumers. It also offers e-commerce platform services to enterprise-level customers through the latest Software & Services business which gives access to its end-to-end technology. The company reports its revenue under two segments. The first segment is Retail, and the second segment is Software & Services. The company’s retail business generates 89% of the total revenue, and Software & Services, which is newly established, contributes 11% of the total net sales. According to a recent strategic update, the retail segment of the company has achieved growth of 11.2%, and the Gross Merchandise Value (GMV) has grown by 19.4% YoY in the second quarter of FY2022. GMV has shown strong growth in the last three consecutive quarters. Retail active customers have reached 167 million, which is 9% YoY growth. The company has changed its “MaxDelivery” brand, which it acquired in 2021 as “Boxed Market” to expand into new markets. To expand additional Boxed Market micro-fulfillment centers in Westchester and Brooklyn, New York, Boxed recently acquired new leases. The centers are anticipated to launch fully in the fourth quarter of this year. These expansions can significantly affect the financials in the long term.
Software & Services business has branded as “Spresso” to create a separate brand value in the market. The company has a strong growth vision for this segment as it has expanded business in the USA and Vietnam. I believe the Software & Services segment has huge growth potential in the coming years as the company has strategic plans to capitalize on the recent commercial momentum by building its broader Boxed ecosystem to offer a wide range of services. I think the recent AEON partnership and the entry into the USA can significantly contribute to the long-term target of positive EBITDA by FY2024 and the company’s ecosystem.
Expansion Into New Geographies
The company has recently signed a Memorandum of Understanding (MoU) with AEON’s subsidiary AEON Vietnam Company Limited to expand the geographical reach of the end-to-end software and services platform in Vietnam. The company has previously partnered with AEON to expand Boxed’s proprietary e-commerce technology in the Malaysian market, which was very successful. I think the previous successful collaboration gives certainty about the synergy of both entities. The company has also announced that after the Vietnam market, it will continue the expansion in Southeast Asia with AEON. I believe this global expansion of the company can positively affect the financials of the company in the long term. It has also won the first US-based company contract of Jeffers Pet which is a key milestone as it opens the door to the new geographical market and potential customer base. I think the company’s expansion of the Spresso platform in the USA and Vietnam might act as a primary growth catalyst in the coming period as both expansions have increased the global reach.
What Is The Main Risk Faced By BOXD?
Industry-wide inflation that we are currently facing has criticality affected the company’s profitability. BOXD is susceptible to the increasing cost of goods as it directly affects the customer demand for the company. BOXD operates in a highly competitive market, and to maintain sales and retain customers, the company has to sell goods at an attractive price. To maintain the selling price of the products, the company has to take a hit on the profit margins. The inflation is likely to continue through FY23, which is not a positive sign for the company.
Technical Analysis & Fundamental Valuation
BOXD is trading below its 50-day, and 100-day weighted moving average (WMA). This reflects that the company has negative technical indicators due to the severe downside since June 2022. The stock price is facing resistance at the 50-day WMA level, and unless the stock crosses the 50-day WMA, it’s difficult to see momentum in the stock. The RSI indicator, on the other hand, suggests that the stock is consolidating in the 30-50 RSI band range. This range is generally considered a buy zone; however, there is no significant divergence as per the RSI chart to suggest any buying momentum in the stock. As per my analysis, both RSI and WMA indicators don’t reflect any buying momentum in the stock, and I would recommend that investors hold the stock for now.
The expansion in the US and Vietnam is expected to drive growth for the company, but the company is not attractive when it comes to valuation. It is currently trading at a stock price of $1.95. It has witnessed an 80% decline in the share price over the last one year. The company has -$1.63 EPS estimates for FY22 compared to the positive EPS of many of BOXD’s peers. BOXD is not expected to be profitable anytime soon. The company also has F grade for profitability as per the quant ratings. I believe the investors should hold the stock till the company recovers from the current downturn in the economy.
BOXD is expanding its operations in the US and Vietnam which is expected to drive growth for the company, but the company’s recent quarterly results present a gloomy picture of the company’s future. Also, the company is not attractively valued at current price levels. I believe the investors should wait for the company to get back on track in terms of sales and profitability before investing in it. I assign a hold recommendation for BOXD considering all these factors.