It’s a risk-on day in the stock market, with growth stocks rallying nicely on Wednesday. We can see the risk-on attitude in tech stocks, as well as penny stocks like Exela Technologies (NASDAQ:XELA). XELA stock is up 10% on the day.
Helping drive the stock higher? A new contract was announced by the firm. Exela Technologies has a contract with a European-based financial services firm. From the press release: “The total contract value (“TCV”) over the 5-year term is valued at approximately $6 million.”
At one point in Wednesday’s session, XELA stock was up 17.5% on the day. However, despite the solid gains, this stock continues to struggle. As of 2:00 Eastern on Wednesday, shares are still down 1.5% for the week.
Even worse, Exela has seen its stock fall in 12 straight months already and shares are down 99% from its 2021 high. Last time, the stock topped out shortly after the company’s 1-for-3 reverse stock split. Bulls were likely hoping that another reverse split would give the stock a short-term burst, but we’re not seeing that pan out this time around.
XELA stock underwent a 1-for-20 reverse stock split on July 25. Even with today’s rally, shares are down more than 50% from the close of trading on the 25th.
Will The New Deal Help XELA Stock?
All of this boils down to the simple question: Will this help XELA stock?
While any new revenue will help, this firm is going to need a lot more than $6 million over a five-year term in order to dig itself out of the hole it’s in now. Not to mention, the company did almost $280 million in sales last quarter and is forecast to do more than $1.1 billion in revenue this year.
A stock doesn’t do two reverse stock splits since January 2021 and still end up 99% off its 18-month high if it’s in good shape. The deal is a positive step — like any new business — but it alone won’t be enough to change Exela’s trajectory.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Bret Kenwell 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.
