Don’t be tempted to buy troubled parcels delivery firm DX Group (DX.) as a recovery play or takeover target at 24p. We believe there are too many unanswered questions to warrant buying on share price weakness, so wait until there is greater clarity from the company before making a judgement on the stock.

More than two thirds of the company’s value was slashed last week after a major profit warning (13 Nov).

The company had been popular among income investors thanks to a generous dividend yield. DX says it now expects to only pay 2.5p dividend for the current year, a huge drop from the 6p paid last financial year. This could prompt many investors to cut their losses and exit completely.

The fact that the outlook for DX can have changed so dramatically since full-year results on 21 September is a big concern. It states that document delivery volumes are down, staff costs are up and new business opportunities are converting more slowly into work.

Cantor Fitzgerald has reduced its rating from ‘buy’ to ‘hold’ and slashed its target price from 115p to 26p.

We are concerned that DX could reveal more bad news as it is under pressure to give more clarity about the sudden drop-off in trading. Avoid at 24p.