Shares of business processing automation (BPA) specialist Exela Technologies (NASDAQ:XELA) stumbled heavily on Thursday despite seemingly positive news. Early this morning, the company announced its collaboration with Microsoft (NASDAQ:MSFT) to help undergird generative artificial intelligence (AI) based technologies on the technology stalwart’s Azure public cloud platform. Nevertheless, investors view XELA stock as nothing more than speculation.
According to Exela’s press release, the aforementioned collaboration will initially focus on India. Primarily, the partnership will strengthen Exela’s previously announced AI initiatives. On June 20 of this year, the BPA specialist announced that it has integrated generative AI across its products and services. In particular, these protocols will help answer customer service questions along with processing the busy work of big data analytics.
Regarding the latest announcement, the Microsoft partnership should power Exela’s low-code platforms (that is, applications operated under a model-driven, drag-and-drop interface) with a set of new generative AI capabilities. This framework should enable Exela customers “…to drive personalized engagement, optimized workflow automation and industry leading AI-decisioning capabilities.”
Beyond the enhancement of customer service protocols, the generative AI partnership “…will be used to speed up document lifecycle management, product systems development lifecycle and the analytics stack.” Management also emphasized that it will deploy digital intelligence in a responsible and ethical manner.
Investors Not Buying Into XELA Stock
While compelling on the surface level, investors apparently see little reason to trust XELA stock. During the early afternoon session, shares gave up almost 7% of equity value. Since the start of the year, the BPA firm finds itself nearly 71% below parity.
Not only that, following Exela’s previous June 20 generative AI announcement, XELA stock did not respond positively at all. Initially, shares fell on the news before flatlining to around July 7. And while the stock did show upward mobility through the Aug. 1 session, speculators find themselves at square one.
Unfortunately, Exela suffers from huge financial vulnerabilities. According to investment data aggregator Gurufocus, XELA stock suffers from six red flags. These include poor business operation (as determined by a bottom-ranking Piotroski F-Score) and financial distress (as indicated by a negative Altman Z-Score).
Heaping troubles on the firm, Exela also suffers a retained loss of nearly $2 billion with little reason to believe that it can crawl out of the depths. On an annual basis, revenue has been steadily declining since 2018, when the firm posted nearly $1.59 billion in revenue. In addition, the company consistently loses money, creating a swirling effect.
Why It Matters
Though the Azure news may appear to be exciting, it did little to change Wall Street’s apprehension toward XELA stock. Analysts refuse to cover the tech firm. The last expert to do so was B. Riley Financial’s Zach Cummins, who pegged it a “hold” about 12 months ago. Cummins’ price target sat at $2, implying almost 58% downside risk.
On the date of publication, Josh Enomoto 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.
