Financial vs Industry Analysts and Box

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box kkr

Financial vs Industry Analysts and Box

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last updated:

My take was that this investment was a good move for Box. It provides longer-term stability and some protection against an activist investor who may well have wanted to control or flip the company. My interest is in the industry as a whole, buyers, users, and builders of technology.

Within the tech sector, there are generally speaking two types of analysts. Financial analysts and industry analysts, in case there is any confusion, Deep Analysis is firmly in the second camp. We both study and provide expert advice to clients, but our perspectives and advice differ radically. Financial analysts at the end of the day focus on the company stock and financial performance. Industry analysts instead focus on the products and market for those products. Occasionally our worlds overlap, as was the case last week when TechCrunch journalist Ron Miller asked me to comment on Box raising $500m from investment firm KKR. For which we took a bit of flack from market traders who disagreed with us.

My take was that this investment was a good move for Box. It provides longer-term stability and some protection against an activist investor who may well have wanted to control or flip the company. My interest is in the industry as a whole, buyers, users, and builders of technology. If I was a financial analyst, I might have applied a different lens to my analysis; for example, how will such an investment affect the stock price of Box in the short, medium, or long term? To put it another way, I have no genuine interest in the share price or how investments will impact shareholders. I do have a great deal of interest in how the investment might impact Box, its employees, its customers, and of course, its products.

Similarly, when a company is bought and sold in the sector, I, or any other industry analysts, am not particularly interested in the agreement’s price or financial structure instead of how the products will align and how customers will or should react to the changes. Both the financial and industry analyst perspectives are valid though it may mean that one is optimistic about a situation or transaction and the other less so.

However, to be clear, at Deep Analysis, we do talk to and work with investors a great deal. They seek out our independent advice and insights. We speak with Private Equity (PE) firms, Venture Capital (VC’s), brokers, dealers, and of course, software firms that are looking to buy and sell companies. At times at Deep Analysis, we refer parties to one another but always with our industry analysts’ remit and boundaries. But they don’t come to us for detailed financial advice; they come to us to understand the products, markets, and even corporate cultures of firms they are looking to acquire. Alternatively, as potential sellers of their organization, for advice on their position in the market, the competitive landscape, and guidance on repositioning, pivot, or simply improving their messaging and products.

So that is a long and rambling way of firstly explaining at least in very basic terms the differences between two analyst approaches, and secondly, to put a marker in the sand. If you want to know what stocks to invest in, we are the wrong people to ask, and if you did ask, we would not give you an answer. But if you want advice on tech products and their related markets, you are coming to the right place! And finally, who knows? We may have been right after all, as Box’s share price at the time of writing is up 3% 🙂

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