Is the Xerox stock price too cheap or is it a value trap?

The Xerox (NYSE: XRX) stock price continued its bearish trend this week after the firm published mixed results and guidance. The shares crashed to a low of $16.15, which was the lowest level since November 2020. It has declined by more than 52% from the highest level in 2019.

Why has XRX crashed?

Xerox Holdings is a giant company that provides printing products to companies from around the world. In 2019, the company came into the limelight after it made an unsolicited offer to acquire HP, another printing provider. 

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The offer was notable since Xerox was a significantly smaller company than HP, which was then valued at over $34 billion. The goal was to create a large printing company that would compete with foreign companies. At the time, HP rejected the offer saying that it undervalued the company. It also expressed worries about the financial state of the resulting company. Xerox dropped the bid for HP when Covid emerged.

The Xerox stock price has crashed hard since then, bringing its total market cap to over $3 billion. The sell-off continued this week after the firm published weak results. Its revenue dropped to $1.65 billion while its loss rose to 12 cents per share. The firm attributed these losses to the ongoing supply chain challenges, which affected growth and margins. 

At the same time, Xerox announced that it was maintaining its revenue guidance to $7.1 billion. This guidance was lower than what analysts were expecting. 

So, is Xerox a good investment? Many investors are attraccted to the company’s high dividend yield. It has a TTM yield of 7.47% and a forwad yield of 5.97%. These yields are above average. However, the company faces the challenge of debt. 

While it has a total market cap of $3 billion, the company has a total debt of $4.54 billion. Excluding cash, it has a net debt of $2.66 billion. Also, the company continues to face margin contraction and slow growth. 

Xerox stock price forecast

The daily chart shows that the XRX stock price has been in a bearish trend in the past few months. The stock managed to move below the important support at $17.21, which was the lowest level in 2021. It has crashed below the 25-day and 50-day moving averages. The MACD has moved below the neutral level. Therefore, the stock will likely continue falling as bears target the next key support at $15.

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