Xerox Plunges 21.16%—Is the Printing Giant’s New Inkjet Strategy a Red Flag?

Summary
• Xerox announces partnership with Kyocera to re-enter cut-sheet inkjet market
• Q2 2025 earnings report reveals $106M net loss and 0.1% revenue decline
• Intraday price drops from $5.22 to $4.003, erasing 21.16% of value in one session

The printing sector is in turmoil as Xerox’s stock implodes following a strategic pivot and a dismal earnings report. With the stock trading below its 52-week low of $3.445 and volume surging to 10.6 million shares, the market is scrambling to interpret the fallout from the Kyocera partnership and a second-quarter performance that defied even the most bearish estimates.

Q2 Earnings Shock Overshadows Strategic Partnership Announcement
Xerox’s 21.16% collapse was driven by a catastrophic Q2 earnings report that painted a bleak financial picture. The company reported a $106 million net loss, a 1.1% revenue decline, and a 170-basis-point drop in adjusted operating margin. While the Kyocera partnership re-entering the cut-sheet inkjet market was framed as a growth catalyst, investors fixated on the company’s deteriorating fundamentals: a -1.38 P/E ratio, negative operating cash flow, and a dividend cut to $0.025 per share. The market interpreted the strategic shift as a desperate attempt to offset declining core revenues rather than a sustainable growth play.

Printing Sector Volatility Amplified by Xerox’s Downside
The broader printing sector remains fragmented, with HP (HPQ) down 0.24% despite Xerox’s collapse. However, Xerox’s 21.16% drop far outpaces sector peers, suggesting its decline is driven by company-specific risks rather than a sector-wide selloff. Kyocera’s inkjet technology partnership has not yet translated into sector-wide optimism, and Xerox’s financial distress—highlighted by its -1.38 P/E and $1.5 billion debt-laden Lexmark acquisition—has isolated it as a high-risk name.

Bearish Technicals and High-Leverage Options Signal Short-Side Opportunity
• 30D MA: $5.43 (above current price), 200D MA: $6.93 (well above)
• RSI: 51.06 (neutral but trending lower)
• Bollinger Bands: Price at $4.1155, near the lower band ($4.514)
• MACD: 0.1103 (bullish divergence), but histogram contraction suggests fading momentum

Xerox’s technicals confirm a short-term bearish bias, with the stock trading near its 52-week low and key support levels at $4.00–$4.50. The 200-day average at $6.93 acts as a distant resistance, but the near-term outlook remains fragile. For options, two contracts stand out:

• XRX20250815P4 (Put, Strike $4, Expiry 2025-08-15):
- IV: 72.77% (elevated volatility)
- Delta: -0.4057 (moderate sensitivity to price moves)
- Theta: -0.0146 (moderate time decay)
- Gamma: 0.6168 (high sensitivity to gamma)
- Turnover: 4,151 (strong liquidity)
- Leverage: 20.55% (moderate leverage)
- 5% downside scenario payoff: $0.055 (max(0, 4.11550.95 - 4))
This put option offers high gamma and liquidity, ideal for a short-term bearish bet. If XRX breaks below $4.00, the put’s delta could accelerate, amplifying returns.

• XRX20260116P4 (Put, Strike $4, Expiry 2026-01-16):
- IV: 74.80% (elevated)
- Delta: -0.3830 (lower sensitivity)
- Theta: -0.0027 (slow decay)
- Gamma: 0.1749 (moderate)
- Turnover: 34,532 (excellent liquidity)
- Leverage: 5.14% (low leverage)
- 5% downside scenario payoff: $0.055
This longer-dated put offers durability and high turnover but lower leverage. It’s better suited for a multi-month bearish thesis.

Hook: If XRX breaks the $4.00 psychological level, XRX20250815P4 offers explosive short-side potential.

Backtest Xerox Stock Performance
The backtest of XRX's performance after a -21% intraday plunge shows mixed results. While the 3-day win rate is 46.56%, indicating a higher probability of a positive return in the short term, the longer-term returns are negative, with a 10-day return of -1.25% and a 30-day return of -3.54%. This suggests that while the ETF may bounce back in the immediate aftermath of a significant drop, it may continue to underperform in the medium to long term.

Immediate Breakdown Below $4.00 Signals Further Pain—Act Fast
Xerox’s collapse is far from over. With the stock near its 52-week low and technical indicators confirming a breakdown, the path of least resistance is lower. The Kyocera partnership is unlikely to offset Q2’s financial carnage until concrete revenue upside materializes. Investors should prioritize short-term puts like XRX20250815P4 and monitor the $4.00 support level. Meanwhile, sector leader HPQ (-0.24%) offers a safer haven for those avoiding Xerox’s debt-laden volatility. Act now—before the next earnings report deepens the abyss.