GXO Logistics: Time to Buy the Dip for the Rip in 2025

GXO Logistics Inc. GXO is one of the largest contract logistics companies in the transportation sector. They enable businesses to manage distribution operations and supply chains better, utilizing GXO's vast global network of warehouses and distribution networks. GXO has the advantage of scale and technology that utilizes artificial intelligence (AI), automation, robotics, and data analytics combined with end-to-end transportation solutions. These solutions are used by well-known brands including Apple Inc. AAPL, Nike Inc. NKE, Verizon Communications Inc. VZ and Boeing Co. BA. GXO competes with FedEx Inc. FDX and UPS Inc. UPS.

Takeover Speculation Surge and Rejection as CEO Retires

Investors have been on a rollercoaster ride since October 2024. With such strong assets and reputation, GXO was rumored to have been approached by many bidders looking to merge. GXO shares surged over 22% in late October on takeover rumors. However, on December 3, 2024, Bloomberg reported that the company turned down buyout offers and decided to remain independent.

Additionally, GXO's CEO Malcolm Wilson will be retiring in early 2025. This sent shares into a tailspin, collapsing 16% back to its October levels prior to takeover rumors. It's worth noting that GXO hasn't made any comments to confirm takeover offers or rejections; it's just that its CEO is retiring.

Investors are not only disappointed that the company didn't get bought out but also that its leader is stepping down, which is an odd series of events. Usually, a CEO may step down ahead of a company being acquired. Still, if the company decides to pursue a standalone strategy, it's expected that the CEO will remain in charge, not step down.

GXO Decides to Go It Standalone   

GXO Logistics is often the acquirer rather than the acquired. It was a spinoff from XPO Inc. XPO in 2021 to separate its transportation and logistics businesses. GXO reported third-quarter 2024 EPS of 79 cents, beating consensus analyst estimates by 2 cents. Revenues rose 27.8% YoY to $3.16 billion, beating consensus estimates for $3.01 billion. The company signed $226 million in new business, bringing the total to nearly $750 million in annualized revenue and hitting record levels of new business in 2024. Its sales pipeline increased 30% YoY to $2.4 billion, hitting two-year highs.

GXO CEO Malcolm Wilson commented, "We see increasing demand for e-commerce capacity. This long-term structural tailwind has been a key growth driver for us over the past five years. More than half of our new wins in the third quarter originated from e-fulfillment, and we also opened the largest e-commerce warehouse in France in partnership with one of our long-term customers.”

GXO Logistics Reaffirmed Guidance

For the full-year 2024, GXO Logistics reaffirmed EPS guidance of $2.73 to $2.73 versus $2.77 consensus estimates. The company reaffirmed organic revenue growth of 2% to 5%.

GXO Forms a Descending Triangle Breakdown

A descending triangle pattern is comprised of descending (falling) upper trendline resistance, which represents lower highs on bounce attempts. The flat-bottom lower trendline support represents bidders holding the line at a price support. The breakdown occurs when the stock collapses through the lower trendline support.

GXO commenced the descending upper trendline off the $63.33 swing high hit during the takeover speculation. As the excitement died down, each bounce made lower highs against the $57.93 lower trendline support. The company made no comments pertaining to the rumors. GXO gapped down from $57.93 to $53.03 on December 4, 2024, after the Bloomberg report that they turned down bidders to remain independent, as well as the company's CEO retirement news. GXO shares collapsed over 15% in the following days, returning to the levels they had been trading at in October before the takeover rumors. The weekly anchored VWAP is at $52.65. The daily RSI has fallen into oversold territory at the 25-band. Fibonacci (Fib) pullback support levels are at $49.35, $47.41, $45.73, and $43.81.  

GXO’s average consensus price target is $66.33, implying a 33.33% upside and its highest analyst price target is $83.00. Ten analysts have rated it a Buy, and three have given it a Hold. The stock has a 2.3% short interest.

Actionable Options Strategies: Bullish investors can consider using cash-secured puts at the Fib pullback support levels to buy the dip. If assigned the shares, then writing covered calls at upside Fib levels executes a wheel strategy for income.

The article "GXO Logistics: Time to Buy the Dip for the Rip in 2025" first appeared on MarketBeat.