Shares of XPO Logistics (NYSE:XPO) fell more than 20% at the open on Thursday and were trading down more than 12% midmorning as fear grows that the COVID-19 coronavirus pandemic will significantly impact domestic and international shipping volumes.
President Donald Trump, in an Oval Office address to the nation on Wednesday night, announced a series of new travel restrictions related to the novel coronavirus, including a mention of limiting cargo shipments as well.
That mention appears to have been an error, with Trump on Twitter late Wednesday clarifying the restrictions are on people, not goods. But the dire tone of the speech spooked markets on Thursday morning, and sent shares of shipping companies like XPO tumbling.
XPO has a large presence in Europe, the target of the latest restrictions, thanks to its 2015 purchase of France's Norbert Dentressangle. While it is too soon to know the exact impact on cargo volumes in Europe and globally due to the coronavirus, there is enough evidence to suggest the company is likely to experience near-term disruptions that will likely eat into current-quarter earnings and beyond.
The turbulence comes at a tricky time for XPO, which announced back in January that it was exploring the sale of one or more of its businesses to address what it sees as the market's undervaluing the sum of its many parts. The company is currently running multiple auctions for assets spread across Europe and the U.S. in a period of great uncertainty, which could at the very least delay decision-makers if not cause interest in deal-making to wane.
Shares of XPO are now down 33% year to date, and down more than 45% since mid-February. The magnitude of the drop is based on fear, and not fundamentals, and the stock currently looks extremely oversold.
That said, until the coronavirus is perceived to be under control, buyers are likely to stay away, and it could be difficult for XPO shares to find a bottom. But for those who can tolerate the volatility and hold for the long haul, XPO shares look very intriguing at these levels.