Please ensure Javascript is enabled for purposes of website accessibility

Why XPO Logistics Stock Dropped 3.3% Today

By Rich Smith – Apr 9, 2020 at 4:55PM

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

With a sale off the table, Oppenheimer lowers its outlook for XPO.

What happened

On a generally green day for stocks as a whole, with the S&P 500 rising about 1.5% at the market close, shares of XPO Logistics (XPO -2.81%) ended Thursday with a definite reddish tinge, down 3.3%. At one point today, XPO shares were down as much as 6%.

Tractor trailer truck rolling downhill

Image source: Getty Images.

So what

Early Thursday, Oppenheimer reduced its price target for XPO, cutting the stock from $106 to $85 despite retaining an outperform rating. Oppenheimer explained its move by noting that XPO stock has performed better than other shipping stocks in recent months, mainly because management was known to be pursuing strategic alternatives for the company, which is generally viewed as Wall Street code for "We're going to sell the company at a premium."

In late March, however, XPO terminated its review of alternatives "in light of current market conditions." Which in turn was probably code for "Stock prices are beaten down, so now's not a good time to sell."

Now what

Whatever XPO's reasons, with the catalyst of a potential sale of the company no longer on the table, Oppenheimer has now concluded that XPO is worth a bit less than it used to be.

That being said, even the analyst's new and lower price target of $85 appears to imply more than 37% upside in the stock. With XPO shares currently costing less than 16 times trailing earnings, and with most analysts in agreement that the company will grow its earnings at about 23% annually over the next five years, I have to say I agree with the analyst on this one. Judging from the P/E, at least, this stock looks cheap enough to buy.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends XPO Logistics. 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

XPO Logistics, Inc. Stock Quote
XPO Logistics, Inc.
XPO
$44.67 (-2.81%) $-1.29

*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
342%
 
S&P 500 Returns
107%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/29/2022.

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.