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Justin Sullivan

Box (NYSE:BOX) shares gained more than 8% on Monday as investment firm Morgan Stanley upgraded the cloud storage company, noting its offerings are “underappreciated” compared to the value they provide and the company is improving its financials and can close the gap relative to its peers.

Analyst Josh Baer moved his rating on Box (BOX) to overweight from equal-weight, along with a $34 price target, noting that the company’s recent results highlight strong execution and its suite of software products is taking hold.

“Recent results demonstrating higher net retention, lower churn, and strong large deal momentum, with consistent execution across geographies, customer sizes and verticals, suggest Box’s Suite selling and expanding product capabilities are allowing customers to more easily realize the value of the full Box platform, Baer wrote in a note to clients, adding that the “challenging macro” environment is a huge caveat.

Competitor Dropbox (DBX) rose more than 2% in sympathy, along with several other cloud computing companies, including Oracle (ORCL), Microsoft (MSFT), Google (GOOG) (GOOGL) and others.

Ahead of its annual BoxWorks event and financial analyst day, Baer added that a large total addressable market, “relatively durable” growth expectations, margin expansions, continued free cash flow support, stock buybacks and “an undemanding valuation” support the upgrade.

Baer noted that Box (BOX) is not completely immune to the global economy, but it is “relatively well positioned,” especially as Chief Information Officers scrutinize incremental software spend. Box’s (BOX) broad content management platform allows the company to “better weather macro impacts and continue to execute through potential headwinds.”

Earlier this month, investment firm Citi said application software companies such as Box (BOX) are showing exceptional “quality” during the current economic environment and have opportunities in front of them.

Analysts are mostly bullish on Box (BOX). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates BOX a BUY.

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