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Morgan Stanley analyst Ravi Shanker upgraded shares of XPO Logistics (NYSE:XPO) to Overweight from Equal Weight.
The price target remains $75, signaling an upside of over 50% based on yesterday’s closing price of $48.46.
The upgrade move is mostly based on valuation as a 35% YTD drop in shares is overdone, Shanker argues.
“The stock appears to be reflecting steady state earnings would get cut in half, which can only happen if macro is significantly worse than our base case or execution deteriorates — both of which is unlikely, in our view,” the analyst told clients in a note.
Valuation is “very attractive”, the analyst added.
“Risk-reward look very favorable even in a potential recession scenario – with limited near-term downside and potential for significant upside, especially if idiosyncratic catalysts deliver,” Shanker added.
XPO shares are up almost 5% in pre-open Friday.
