Penny Stocks to Watch: Is Office Depot too Risky?

Penny stocks

Office Depot (NASDAQ:ODP) is a retailing penny stocks company that dropped significantly in yesterday’s trade. Dropping from $3.77 USD to its current price of $2.86 USD, investors have clearly been shaken.

Retailers are facing a tough climate in recent years, and Office Depot has suffered greatly. Is this penny stock still worth your time or is there a light on the horizon?

 Let’s check this out.

Penny Stocks to Watch: Office Depot

The most recent decline has come from the company’s disappointing preliminary first-quarter earnings report.

Office Depot reported that revenue and adjusted operating income for Q1 was to come in at $2.76 billion and $65 million, respectively.

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The revenue figure came in below the estimate of $2.82 billion and, even worse, showed an overall declining sales period with last quarter’s revenue income coming in at $2.83 billion. Further, it “compared unfavorably with $93 million in adjusted operating income the year before.”

CompuCom

Okay, falling sales is a bad sign, but a bigger problem becomes more apparent when we look at the bigger picture. Office Depot acquired IT service provider CompuCom in 2017 for $1 billion. This acquisition was to mark a turnaround for the already ailing retailer. It was to be “a key part of the company’s plan to pivot to becoming an all-encompassing business solutions provider.”

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Now, it is blaming its poor results on CompuCom’s poorer than expected performance—with an operating loss of $15 million expected at this division. This is the result of lower-than-expected revenue from existing customer projects.

So what investors must be hearing is, the acquisition to turn things around has failed. It’s no surprise that on this news, this penny stock is falling.

Is There a Light?

For those willing to wait this one out, the company is promising to take steps to ensure performance improves at CompuCom. It says it will take steps to improve speed and efficiency as well as “reorganizing its customer-facing staff.”

With management aware of the issue CEO Gerry Smith furthered: “CompuCom’s operating performance was clearly disappointing and the actions we are taking to improve its operations and sales performance are expected to yield improving results in 2019.

Of course, investors would have heard similar promises made before. So can this penny stock prove itself or has the plan simply not worked out? What are your thoughts?

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