Please ensure Javascript is enabled for purposes of website accessibility

Why YRC Worldwide Stock Just Crashed 16%

By Rich Smith - Aug 25, 2020 at 11:57AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A Wall Street analyst upgrades the stock. Investors panic anyway.

What happened

Shares of trucking company YRC Worldwide (YELL -1.20%) 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, 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.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Yellow Corporation Stock Quote
Yellow Corporation
$7.39 (-1.20%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/09/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.