Xerox Stock Tests Key Level After Downgrade

J.P. Morgan Securities cut its rating on the printing stock

J.P. Morgan Securities downgraded Xerox Holdings Corp (NYSE:XRX) to "underweight" from "neutral," citing declining revenues. The brokerage firm also said Xerox's possible sale of its financing unit and its current capital allocation plan create short-term risk for XRX bondholders.

The skepticism toward XRX has picked up elsewhere on Wall Street, with short interest up 13.5% in the latest reporting period to 7.86 million shares -- the most since Dec. 1. These bearish bets account for just 3.6% of Xerox stock's available float, though, or 3.7 times the average daily pace of trading.

Meanwhile, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.10 ranks in the 91st annual percentile. In other words, speculators are more put-heavy than usual among options expiring in three months or less.

XRX stock is down 0.8% today at $27.85 in reaction to today's bear note. Longer term, the shares are up roughly 41% year-to-date. And while the equity is down almost 24% from its July 3 18-month high at $36.57, it's found a foothold in the $27.00-$27.25 range, home to a late-January bull gap.