Xerox Stock Predictions: Acquisitions Will Drive Up Xerox’s Value (XRX)

Xerox Stock Predictions

Company Profile: Xerox Corporation

Xerox Corporation (NYSE: XRX) is an American multinational corporation that became well know and profitable from its printer business. The company is attempting to emphasize its services business more, while the printing business is called under the Document Technology segment. This and the Services segment make up two of the company’s three segment, with Other being the third. The Services segment aims to provide customers with offerings and technology to allow them to focus on the core of their businesses. Some of the services that the company offers to its customers are customer care, finance, and human resources, while it also provides vertical solutions such as healthcare, transportation, and telecommunications.

xerox stock prediction

The company is large and well established, and is consistently included in the list of Fortune 500 companies. With a strong financial base and well known brand, the company has a solid base making it a solid candidate for a solid investment choice.

Current Events: Q1 2015

While Xerox appears to be a solid investment choice based off its history and financial standing, the stock price has fallen over 18% so far this year. The main reason the stock price has dropped so far this year is because of the company’s poor first quarter results.

Xerox reported quarterly revenue of $4.47 billion and EPS of $0.21. These figures were dramatically down from the same quarter a year earlier, falling 6% and 19%, respectively. The revenue figure narrowly missed analysts’ expectations as well, which was set at $4.56 billion. Besides the falling revenue and income during the previous quarter, the company also lowered its full-year guidance, with EPS projections lowered from $1.00-$1.06 to $0.95-$1.01.

With the negative revenue and income updates as well as lowered guidance, the stock price tumbled around 10% after the earnings report was announced. This is understandable, as the company’s turnaround has taken longer than investors expected, and might not be completed in 2015. However, there are reasons to be bullish about the stock going forward, as the stock should increase from its current level, which is near its 52-week low.

Analyst Opinion

One reason that the company is bullish over the long-term is that the company is currently undervalued, which makes sense considering it has fallen so drastically over the last few months. Analyst opinion supports the fact that the stock is currently trading at a price below the company’s actual value.

Analyst Opinion

Figure 1. Source: Yahoo! Finance. Analyst Opinion For Xerox.

The mean recommendation from analysts on Yahoo! Finance is buy, with a mean target price of $13.52. The stock is currently trading at $11.48, well below this target price. One analyst that recently upgraded the stock is Citigroup, which changed its stance on the stock from Neutral to Buy and set a price target of $15. After the poor earnings report, the company lowered its target price to $14, but maintained its Buy position.

The consensus recommendation of buy indicates that this stock is now valued at an appropriate level to cause investors to consider initiating a position in the stock. With the stock price currently trading at $11.32, the current mean target price represents an upside of 19.4%.

Return Of Value To Shareholders

Xerox has a solid history of returning value to shareholders, something that is very attractive considering the current low valuation of the company. The company has an annual dividend yield of $0.28, which represents a dividend yield of 2.27% at the current price.

Company management has also emphasized returning value through share repurchases, buying back $216 million shares during the first quarter. Xerox will remain aggressive on buying back shares, using its cash balance of $872 million after the $113 million in cash flow it delivered during the first quarter.

Acquisitions Are Bullish Factor Going Forward

Besides the overall good financial health of the company, Xerox is also bullish because of its emphasis on acquisitions going forward. The company is placing an emphasis on areas such as healthcare and expanding internationally, and the company has the resources necessary to fund this growth. Xerox hopes to spend $900 million on acquisitions this year, an amount that should help improve the company’s revenue and margins going forward.

The technology services provider recently acquired Healthy Communities Institute for an undisclosed amount. This purchase will expand the company’s offerings in the healthcare industry. The Affordable Care Act has mandated an improvement in the quality of healthcare available. This acquisition will be combined with the Juvo Care Performance analytics platform that Xerox already runs, creating the largest database of population-based insights.

Acquisitions such as this will help the company expand its footprint and improve its offerings. Furthermore, the impact of acquisitions such as this are not currently factored into the stock price and will be able to quickly make a positive impact on margins, which have fallen recently. While this indicates that the company’s turnaround is still well underway, the company does have the solid financial base and experience needed to undertake this change, making the stock bullish in the future.

Algorithmic Analysis

I Know First supplies financial services, mainly through stock forecasts via their predictive algorithm. The algorithm incorporates a 15-year database, and utilizes it to predict the flow of money across 2000 markets. The algorithm has more data to forecast within the long term and, naturally, outputs a more accurate predication in that time frame. Having said that, intraday traders, along with short-term players, will also benefit by taking the algorithmic perspective into consideration.

The self-learning algorithm uses artificial intelligence, predictive models based on artificial neural networks, and genetic algorithms to predict money movements within various markets. The algorithm produces a forecast with a signal and a predictability indicator. The signal is the number in the middle of the box. The predictability is the number at the bottom of the box. At the top, a specific asset is identified. This format is consistent across all predictions. The middle number is indicative of strength and direction, not a price target. The bottom number, the predictability, signifies a confidence level.

Having explained how I Know First’s algorithm, it is worthwhile to see if the algorithm agrees with the bullish fundamental analysis of the company.

Figure 2. Algorithmic Forecast For Xerox.

Xerox has solid signal strengths of 46.93 and 68.29 in the one-month and three-month time horizons, respectively. These strong, positive signals indicate the algorithm believes the stock is currently undervalued. This makes sense considering the stocks stable financial position, the fact that the stock is currently near its one-year lows, and the fact that the stock price could climb quickly due to acquisitions improving the company’s revenue and margins.