Exela Technologies (NASDAQ:XELA) has gained significant traction on Wallstreet over the past 12 months, gaining 119%. The company provides business process management solutions (BPMS) across the globe, with over 4,000 customers on their books. With growing investor interest in Exela’s future, this article will explore the Xela stock forecast over the next 5 years.
Exela expects to reach Pre-COIVD level revenue in 2021
In the first reported quarter of 2021, Exela’s revenue had fallen 18% Year-on-Year as a result of COVID-19 and its effect on transaction volume. Prior to the financial impacts of COVID-19, Exela generated $365.5 Million in the first quarter of 2020. Since March last year, the company slowly rebuilt sales as the economy recovered.
In the second quarter of 2021, the company noted that they expect to reach pre-COVID revenue levels which has boosted investor moral. For the annual year of 2021, the company expects to report between $1.250 – $1.390 Billion in revenue. The revenue guidance from Exela is also backed by Wallstreet analysts with the average revenue target for 2021 at $1.33 Billion.
XELA stock has a $4 valuation according to B.Riley
In late August, B. Riley analyst Zach Cummins initiated coverage on XELA stock with a Buy rating and a $4 price target. The analyst noted that Exela has a differentiated digital foundation and is positioned to benefit as companies increasingly allocate more capital towards digital transformation and outsourcing.
The analyst is also confident Exela is on a “viable path” toward balance sheet improvement over the next 18-24 months according to theFly. This is of course referring to Exela’s high levels of debt incurred as a result of COVID-19. B.Riley’s target suggests a 54% upside from the current Xela stock price.
Exela revenue to grow at 7% from 2022 according to Cantor Fitzgerald
Earlier this year, Cantor Fitzgerald analyst Josh Siegler initiated coverage on XELA stock with an Overweight rating and $4 price target. Siegler expects Exela to accelerate revenue growth to 7% annually starting in 2022, which is a significant improvement from 1% in 2020. The analyst also expects Exela to expand its gross margin to 35% from 21% by 2022.
Furthermore, the analyst noted that if Exela can improve their debt to equity allocation investors may be more inclined to see the potential upside in the Xela stock forecast.
Increasing short interest has intrigued WallstreetBets
The Xela stock short interest grew to 25% in June and spiked to 37.65% in July which was significantly higher in comparison to the companies short interest float throughout 2020. Generally speaking, short interest above 10% is considered high suggesting more pessimistic sentiment towards the company. Reddit took note of this spike in short interest, and investors pushed the stock to heights of $4.34 in late June – early July.
However, mid-way through August Xela stock short interest plummeted to 12.49%. The short interest has likely dropped off after the stock fell back into the $2.50 territory. We will see over the next quarter if shorts will reignite their bets against Xela stock.
XELA Stock Forecast – How will XELA stock perform over the next 5 years?
In recent months, Exela Technologies has been restructuring the companies debt and equity allocations. In 2021 alone, Exela has reduced cumulative net debt by $200 million. The company has expanded its liquidity position to $200 Million as of August 31. In addition, Exela has made way for increased free cash flow in pursuit of future growth and value opportunities.
So why is this important to investors? Cantor Fitzgerald analyst Josh Siegler noted to investors that if Exela can fix its capital structure (debt and equity allocation), investors will turn their attention to the improving fundamentals and the stock’s significant upside potential according to TheFly. From a fundamental standpoint, a reduction in debt generally decreases the cost of equity, or the required rate of return from investors.
Furthermore, Exela has highlighted strong quarterly customer growth. This growth includes a 99% increase in DMR SMB customers and 144% growth in Drysign users. In particular, the company sees opportunity in an untapped addressable market. Some analysts believe that Exela could break even by 2023, with a profit of $63 Million. According to Simply WallSt, Exela would need to grow at 103% annually to achieve profitability by 2023.
The Bottom Line – Xela stock forecast
Overall, Exela are positioning their business to capitalise on a growing TAM over the next few years. The Xela stock forecast from Wallstreet analysts remains bullish, with an average upside of 73% from the current Xela stock price. The companies high levels of debt remains a concern for some investors. However, the company is actively aiming to restructure its debt levels with debt buy-backs and rating equity.
The information above is not financial advice and does not constitute as a recommendation. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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