Nomura Out Bullish On Exela Technologies Ahead Of Q2 Report

Exela Technologies XELA is set to release second-quarter results Aug. 9, and Nomura is taking a bullish stance ahead of the print. 

The Analyst

Nomura's Dan Dolev initiated coverage of Exela Technologies Inc XELA with a Buy rating and $10 price target. (See the analyst's track record here.) 

Dolev named six reasons to own Exela Technologies:

• The company has a large and growing total addressable market, with a global business processing outsourcing and business-processing-as-a-service market of $270 billion; he expects it to grow at more than a 5-percent CAGR by 2022. 
• Exela's exposure to legal and health care outsourcing could generate above-industry growth rates, the analyst said. 
• Dolev sees the company as well-positioned to win because it serves nine of the top 10 U.S. banks, 14 of the top 20 U.S. insurance companies and the top 5 health care payers. It also has low customer concentration, little reliance on H1B Visas and an abundance of proprietary technology, he said. 
• Exela has improving fundamentals, Dolev said. Revenue per employee has increased from $17,000 over a decade ago to $69,000 today. The analyst forecast a mid-single-digit reduction in the employee base and a 95-percent renewal rate.
• Potential savings and synergies could drive 400-500 basis points of margin growth by 2020, Dolev said. The company has identified more than $80 million in synergies, he said. 
• The stock has an attractive valuation and trades at a 50-percent discount to peers, according to Nomura. 

The Price Action

The stock gained around 6 percent on Monday and it is currently trading around $5. Nomura's price target implies that there is a chance to double your money in the stock.

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