On Wednesday, XPO Logistics (XPO) shares sold off hard after the logistics and delivery company issued an earnings warning by way of an 8-K filing with the SEC. Specifically, XPO warned investors that adjusted pre-tax operating earnings would rise by just 12% to 15% in the coming year, down from original projections for growth of between 15% and 18%. Many of those watching XPO interpreted the warning as a sign that macroeconomic and geopolitical pressures are having an impact on its business, including trade-related tensions that have discouraged global investment.
However, Cowen analyst Jason Seidl remains positive on XPO shares and believes this current sell-off is unwarranted. To reflect his upbeat view of XPO stock, Seidl keeps his rating at Outperform with price target of $112, which implies an upside of 121% from current levels. (To watch Seidl’s track record, click here)
Seidl commented, “We continue to believe that we’re still only in the early innings of XPO’s XPO Direct product, which has a flexible distribution model that targets omnichannel retail and e-commerce customers. XPO Direct has ~95 facilities, up from 75 in 2Q. As mgmt noted on their 3Q18 conference call, the product is scaling rapidly. The weekly total value that moved through XPO Direct in October was 20x the weekly value from summer weeks, mgmt expects XPO Direct to be a $1 bn business over the next 3 years. In our view, this remains one of XPO’s most compelling segments moving forwards.”
“Mgmt noted on both their 2Q and 3Q conference calls that they remain confident that we’ll see a strong peak season which will be a benefit for 4Q earnings in early 2019. We haven’t heard any commentary or seen any data to definitively say that peak was weaker than expected. Lastly, XPO’s intermodal business continues to be a source of confidence for us, and we believe that it’ll continue taking share from the highway,” the analyst added.
Most analysts on Wall Streets are out rooting for this tech titan to be a winning stock pick, as TipRanks analytics showcase XPO as a Strong Buy. Based on 13 analysts polled in the last 3 months, 12 rate a Buy rating on the stock while only one remains sidelined with Hold. The 12-month average price target stands at $102.17, marking nearly 100% upside from Friday’s closing price. (See XPO’s price targets and analyst ratings on TipRanks)