Warning! Don’t Touch XELA Stock With a 10-Foot Pole!
It’s fine to seek out low-priced tech stocks, but I definitely do not recommend Exela Technologies (NASDAQ:XELA) stock. Exela Technologies has financial problems and the company’s shares are at risk of being delisted from the Nasdaq exchange. So, there’s too much risk to justify an investment in Exela Technologies.
Headquartered in Texas, Exela Technologies specializes in business process automation (BPA). This is somewhat related to artificial intelligence (AI), but don’t assume that Exela Technologies is a big winner of the robot revolution.
In reality, Exela Technologies is mainly a “provider of low-tech, low-margin back office services,” to borrow a quote from Louis Navellier and the InvestorPlace research staff. As we’ll see, this hasn’t been a profitable business model for Exela Technologies, and the company hasn’t delivered much (if any) value to its shareholders.
Poor Financial Results Don’t Bode Well for XELA Stock
XELA stock recently traded at around 4 cents and is in danger of being delisted this year. Bear in mind, Exela Technologies has already received multiple noncompliance notices from the Nasdaq exchange. If the Exela Technologies share price doesn’t get above $1 and stay there, it might get booted from the exchange.
On May 4, Exela Technologies’ shareholders will vote on a potential reverse stock split that might prevent an immediate delisting. However, this wouldn’t solve Exela Technologies’ financial problems.
Even after a reverse split, XELA stock could continue to decline because Exela Technologies has less-than-stellar financials. The company’s net earnings loss widened from $70.6 million in 2021’s fourth quarter to $194.1 million in the fourth quarter of 2022.
Moreover, Exela Technologies’ full-year net earnings loss ballooned from $142.4 million in 2021 to $415.6 million in 2022. It’s also a bad sign that the company’s revenue declined 7.7% year over year (YOY) in 2022.
Exela Technologies Has Too Much Debt to Handle
It’s commendable that Exela Technologies is trying to reduce its expenditures. In particular, the company’s efforts are “expected to achieve savings in the range of $65-$75 million beginning in Q4 2022 and into 2023.”
That’s just a drop in the proverbial bucket, though. Exela Technologies has a massive debt load, and cutting $65 million to $75 million in costs will barely make a dent.
Exela Technologies’ long-term debt, net of current maturities, was a whopping $1.01 billion at the end of 2021. The company reduced this to $942 million at the end of 2022. However, that’s still an unmanageable amount of debt for a company with a market capitalization of $45 million.
Plus, as you may recall, Exela Technologies has a less-than-perfect track record of repaying its debt. In fact, the company failed to make interest payments on its debt earlier this year.
You Shouldn’t Touch XELA Stock With a 10-Foot Pole
There’s nothing wrong with envisioning a future for AI and BPA. Yet, it’s important for investors to be selective stock pickers. Exela Technologies has deep financial problems, including a huge debt burden and a widening net earnings loss.
Exela Technologies might avoid delisting for a while if the company enacts a reverse share split. Still, this wouldn’t address the company’s fundamental issues. Therefore, investors definitely shouldn’t touch XELA stock with a ten-foot pole.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.