Xerox Earnings: Declines in Sales Offset by Improved Profitability as Xerox Seeks to Reinvent Itself

We are raising our fair value estimate for no-moat Xerox to $15 from $13 as we incorporate the firm’s improved profitability along with the time value of money following our valuation model roll. While near-term macro trends point to a better 2024 outlook than what the firm faced in 2023, we remain bearish on Xerox’s long-term opportunity. We reiterate our thesis that Xerox is an old dog trying to learn new tricks in an increasingly digitized landscape where printing is not as crucial as it once was. As a result, despite our fair value increase, we continue to view Xerox as trading at a premium and would encourage investors to avoid this no-moat name.