#6 - Pyxus International (OTCMKTS:PYYX)
Sector: Consumer Staples
What’s in a name? If you’re Pyxus International (NYSE:PYX) not as much as you would hope. The company, formerly known as Alliance One International, has seen its stock price drop nearly 70% in 2020. The company is facing a massive cash crunch and an impending $1 billion in debt obligations.
Pyxus has approximately $900 million of bonds maturing in 2020 and it is unlikely the company will be able to refinance the debt since it is at deeply distressed price levels. The revenue picture is not much better. In its most recent quarter, Pyxus had revenue of just $363 million, a 31% decline from the previous quarter. The company has only $396 million of available credit on its balance sheet.
Pyxus is attempting to pivot away from its core business as a reseller of tobacco into the emerging cannabis sector. The problem is that demand in tobacco continues to decline. According to the Altria Group, U.S. tobacco volume is expected to continue to decline between 4% and 6% in 2020.
In an interview for the Wall Street Journal, Alan Brochstein, founder of 420Investor.com said, “They’re not successful at their core tobacco business so they try to pivot into the cannabis space. Pyxus seems to be going at it from a position of weakness.”
About Pyxus International
Pyxus International, Inc, an agricultural company, offers value-added products and services to businesses and customers. It also involved in the purchasing, processing, packing, storing, and shipping tobacco to manufacturers of cigarettes and other consumer tobacco products. The company offers its products in China, the United States, the United Arab Emirates, Indonesia, Russia, Northern Africa, and internationally.
More about Pyxus International- Current Price
- $3.85
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
One of the greatest threats that these companies represent is the possibility that they could default on their debt. Twenty-one companies throughout the world have already defaulted on their debt. On a year-over-year basis that doesn’t look too threatening. It’s about the pace of defaults in the same period in 2019 (22) and 2018 (20).
However, that was in the midst of one of the longest bull markets in history. The coronoavirus pandemic is creating changes to the global economy that have only been war-gamed in economic theory classes. When combined with the price war going on in the oil market and all of these factors contributing to volatility in the market, it’s not hard to imagine an uptick in defaults for the rest of 2020.
And when you consider that the companies in this presentation are already among the least prepared for a global slowdown, let alone one caused by a viral pandemic, they will likely be among the first dominoes to fall.
It’s certainly possible that one or more of these companies may come out of this current market crash with a faint pulse. But each of these companies had serious issues regarding revenue and profit expectations before the economy went downhill. If that side of the equation doesn’t improve, there’s not much hope for long-term growth.
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