What Happened?
Shares of document technology company Xerox (NASDAQ: XRX) fell 3.2% in the morning session after Citigroup reinstated coverage on the stock with a "Neutral" rating and a significantly lower price target.
The analyst, Asiya Merchant, set a price target of $4.50, which is a significant reduction from the previous target of $11.00. The neutral stance is attributed to several challenges facing the company. Xerox is currently undergoing restructuring and cost-reduction efforts while its core print business continues to see declining trends. According to the analyst, while the company is trying to expand its IT Services division through acquisitions, these moves have not yet led to meaningful revenue growth. This action comes amid other recent negative developments for the company, including the departure of its President and Chief Operating Officer and a recent second-quarter earnings report that missed estimates.
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What Is The Market Telling Us
Xerox’s shares are extremely volatile and have had 37 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock gained 3.1% on the news that stocks continued to rally as investor optimism grew for a potential Federal Reserve interest rate cut in September. This optimism was largely fueled by a recent consumer price index report that showed inflation easing, along with public comments from Treasury Secretary Scott Bessent advocating for a significant 50-basis-point rate cut. The prospect of lower borrowing costs tends to boost rate-sensitive sectors like Business Services, as it can encourage companies to increase spending on consulting, IT projects, and staffing.
Xerox is down 52.4% since the beginning of the year, and at $3.93 per share, it is trading 65.3% below its 52-week high of $11.33 from August 2024. Investors who bought $1,000 worth of Xerox’s shares 5 years ago would now be looking at an investment worth $215.99.
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