Exela Technologies Stock (NASDAQ:XELA) has struggled over the past three months, now trading 60% lower. So what happened to Xela Stock and what are the forecasts for 2022? Here’s everything you need to know about Xela Stock as we move into Q1 of 2022.
Exela begins to rebuild revenues following COVID-19 impacts
For investors who are unaware, Exela provides business process management solutions (BPMS) across the globe.
At the beginning 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 then the company has slowly rebuilt sales as business and transaction volumes recovered.
In the last reported quarter, Exela generated $279 Million, a 8.5% decline YOY. For the annual year of 2021, the company expects to report between $1.160 – $1.175 Billion in revenue. The revenue guidance from Exela is also backed by Wallstreet analysts with the average revenue target at $1.17 Billion.
XELA stock has a $3 valuation according to B.Riley
In November, B. Riley analyst Zach Cummins lowered his price target on XELA stock to $3 from $4. Despite the companies Q3 miss, the analyst was encouraged by the improving performance in the core business and Exela’s expanding sales pipeline. Cummins believes Exela Technologies can return to organic revenue growth at a higher adjusted EBITDA margin in fiscal 2022.
At the time of coverage, B.Riley’s target implied a 87% upside at the trading price of $1.60. However, following the stocks bear run the valuation from B.Riley is 275% above the current trading price. We can expect B.Riley to update coverage following the companies Q4 result and end of year results.
Is Short Interest spurring on investor interest?
The Xela stock short interest grew to 25% in June 2021 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, since then Short Interest levels have dropped dramatically to 3.75 % in January 2022. The drop in short seller interest has been gradual following Xela Stock’s decent below $1.
XELA Stock Forecast – How will XELA stock perform in 2022?
In recent months, Exela Technologies has been restructuring the companies debt and equity allocations. In 2021 alone, Exela has reduced cumulative net debt by $454 million. The company has expanded its liquidity position to $227 Million as reported in Q3. 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.
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, despite lowering valuations after Q3. The companies high levels of debt are beginning to normalise and the company is also restructuring the capital allocation through buy backs.
How do you see Xela Stock performing in 2022 considering the current market conditions? Let us know in the comment section below.
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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