Analyst Urges Shareholders to Sell Xerox Stock

Analyst Urges Shareholders to Sell Xerox Stock

Analyst Urges Shareholders to Sell Xerox Stock

Analyst Urges Shareholders to Sell Xerox StockAccording to, Morgan Stanley analyst Katy Huberty reduced her rating on the printer and copier company to Underweight from Equal Weight, with a new price target of $18, down from $20. The headlines said, “Sell Xerox Stock Because Office Printer Demand Is Shrinking.”

Xerox’s fourth-quarter report revealed it had been significantly hit by COVID-19. With many of its end-users out of their offices and with many other offices forced to close, the demand for printers, copiers, and related products took a tumble. Revenue fell 21% to $1.93 billion. Full-year revenue was down 22.5%.

“In downgrading the stock, Huberty cautions that Xerox faces both structural declines in its addressable market and a need to reinvest in new markets. “Like many hardware peers, Xerox faces the conundrum of digesting a shrinking end market while needing to invest in new categories to drive long-term growth,” she writes in a research note. “Without investments, Xerox’s multiple is likely to de-rate given investors’ deteriorating growth outlook, while making long-term investments would depress earnings and likely limit share price upside.”

“She adds that Xerox faces a tougher outlook than most other hardware companies in a post-Covid hybrid work world, which she says argues for a target valuation at the low end of the enterprise hardware group.

“Huberty notes that pre-Covid, demand for A3 office printers—large, high-capacity machines that can print on large paper sheets—was declining in the low single digits, as many offices were gradually doing less printing. She sees that trend accelerating. “The office of the future is likely to be more remote and more digital, limiting the need for large and expensive printing equipment…which implies that Xerox’s revenue base is unlikely to recover to pre-Covid levels,” she writes.

Industry commentator, Ray Stasieczko holds a different view. He told RT ImagingWorld, “Xerox is positioning itself to transition its world brand from defining a copying or printing process to being defined as a service process.

He added, “Xerox is focusing on the realities of digital transformation, and they are positioning themselves to navigate their customers through that intersection I describe between the digital and physical worlds – in ways, their competitors still struggle to imagine.” You can read his view on Xerox’s future here.

You can read the full Barron article here.



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