Analyst Note| Julie Bhusal Sharma |
Xerox started fiscal 2021 with a top line below our expectations as the legacy print company continued to suffer from digitalization trends that have accelerated due to the COVID-19 pandemic. While equipment revenue rebounded, Xerox's primary revenue source, its post-sales revenue, saw another double-digit year-over-year decline for the first quarter. Despite the company's efforts toward operational efficiency through Project Own It, we believe that such efficiency gains will need to work twice as hard to counteract the hit to margins from a diminishing top line. We are maintaining our $22 fair value estimate for no-moat Xerox and view the shares as fairly valued.