Why YRC Worldwide Stock Just Crashed 16%

What happened

Shares of trucking company YRC Worldwide (NASDAQ: YRCW) are down a staggering 16.2% in 11 a.m. EDT trading this morning -- rather an extreme reaction, one must say, to the news that sparked the sell-off. In fact, I'll bet that right about now, the analysts at Stifel Nicolaus are feeling more than a little bit shocked.

Stifel Nicolaus, you see, appears to be the catalyst that sparked today's sell-off -- or rather, a report published by Stifel this morning, resuming coverage of YRC stock.

Cartoon man in suit and tie tugging on a pulley to lift up a falling stock chart arrow.

Image source: Getty Images.

So what

In today's report, summarized by StreetInsider.com, Stifel resumed covering YRC Worldwide stock with a "neutral" rating (not even a "sell") and a price target of $5 (which is to say, 18% more than where the stock is now trading).

As the analyst reports, YRC has succeeded in securing a "much-needed loan" of $700 million from the U.S. government, which will give the company "financial breathing room" that allows it to purchase new equipment and to refinance its debts "for years."

Now what

With this loan in hand, says Stifel, YRC can now "continue operations into 2021." But what happens after that?

YRC, after all, is a money-losing company that was losing money even before the COVID-19 pandemic tipped the economy into recession. Indeed, YRC lost money in two years out of the last five and avoided unprofitability by the skin of its teeth in one more year (2015). Its debt load -- $1.2 billion -- dwarfs the company's $220 million market cap. With the addition of $700 million in new loans from the government, it now probably owes closer to $2 billion.

In short, even if Stifel is right about YRC surviving "into 2021," the question of whether it can survive any longer than that remains highly uncertain.

10 stocks we like better than YRC Worldwide
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and YRC Worldwide wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks


*Stock Advisor returns as of August 1, 2020


Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.