Texas-based Exela Technologies (NASDAQ:XELA) is a company that specializes in tech-enhanced business-process automation. That might sound complicated, so I’ll break it down for prospective XELA stock traders.
First, the company offers transaction processing services. It also provides enterprise information and document management, plus other digital business process services globally.
Turning our attention to the shares, it’s been observed that XELA stock is a potential short squeeze candidate for retail traders. In other words, the stock has “imminent moon shot” written all over it.
However, let’s keep our analysis balanced. Both the stock and the company itself deserve investors’ attention, and possibly even their capital.
A Closer Look at XELA Stock
In January and February of 2021, the $3 level provided hard resistance for the XELA stock bulls. The share price came up to that level a couple of times, only to get rejected.
The price action got more hectic after that. In March and then again in July, there were share price spikes to $4, but those were rejected as well.
Fast-forward to Aug. 4, and XELA stock was trading at around $3.30. The bulls will only be rejected so many times, I expect.
It’s a normal process for a stock to hit a ceiling a multiple times before finally breaking out to the upside. And when that happens, the ensuing rally can be phenomenal because so much tension has built up.
Clearly, this is a prime opportunity for momentum-focused traders. It’s only a matter of time before XELA stock revisits $4.
If this happens on heavy trading volume, then the path to $5 should be free and clear.
Undeniable User Growth
In the 2020s, small and medium businesses (SMB) are the lifeblood of the new economy. The capital influx provided by these businesses should never be discounted.
Therefore, it’s significant that Exela recently revealed a major increase in the company’s SMB customer base in specified business segments.
To be more specific, Exela reported a record addition of new users in the second quarter of 2021 for the company’s Digital Mailroom and DrySign offerings.
The Digital Mailroom quarter-over-quarter user base growth rate nearly doubled, at 99% for the three-month period.
Meanwhile, the DrySign segment delivered an astounding growth rate of 144% in its user base.
There’s also geographic expansion afoot, as Exela launched DrySign in India and Digital Mailroom in the U.K. during the second quarter.
Exela president Suresh Yannamani reported, “We are rapidly multiplying our customer base every month, and they are all experiencing the benefits of digital transformation. We are excited to leverage our technologies as we continue to roll out additional SMB products.”
Major Cash Boost
Of course, Exela’s expansion efforts wouldn’t offer much comfort to investors if the company was struggling financially.
Thankfully, the data confirms that Exela is taking proactive steps to firm up its capital position.
As of June 30, 2021, the company reported having $205 million worth of cash and cash equivalents on hand. And, that doesn’t even include additional borrowing availability under various credit facilities.
Also importantly, Exela raised $85 million under a $150 million at-the-market equity program launched on June 30.
InvestorPlace contributor Chris MacDonald made an insightful point in light of Exela’s $205 million cash-and-cash-equivalents holdings.
“For a company with a market capitalization of around $210 million at the time of writing, investors are getting shares for roughly the gross cash position of the company. That’s not bad,” MacDonald explained.
I concur — that’s not bad at all. All in all, the investors are taking a position in a business that appears to be on solid financial footing.
The Bottom Line
Some folks might only view XELA stock as a possible short squeeze play.
That’s fine, but there’s much more to the story here.
Exela is a business that’s reporting significant user base growth and a firm fiscal position.
Therefore, $4 and $5 are the next levels to anticipate for XELA stock.
On the date of publication, David Moadel 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.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.