XPO doing all the right things, but ‘market may be too optimistic’ – Morgan Stanley

Morgan Stanley raised the XPO Inc (NYSE:) price target to $65 from $45 per share in a note Tuesday, maintaining an Equal-Weight rating on the stock.

Analysts at the firm told investors in a note that XPO’s less-than-truckload (LTL) market opportunity post-YELL has “driven the market to reset its multiple back to normal.”

They added that the company’s earnings build-out will likely take longer than the market hopes, but the analysts believe XPO remains on the right path.

“We believe XPO mgmt. is doing all the right things, and the stock is on the right path to improve normalized earnings power, but the market may be too optimistic about potential YELL structural earnings gains and the speed with which the turnaround may show up in the numbers,” they wrote.

“As such, we believe the stock has gone from the ‘cheap side’ of fair value to the ‘rich side’ of fair value and remains EW but are restoring the multiple to normalized levels and raising our PT from $45 to $65.”

XPO shares were down 0.95% at 11:55 ET (15:55 GMT) on Tuesday.