What Happened?
Shares of freight Delivery Company RXO (NYSE: RXO) jumped 2.7% in the afternoon session after Wolfe Research upgraded the company's stock rating from 'Underperform' to 'Peer Perform'. The upgrade followed a significant drop in the stock's price, which had declined 55% year-to-date, making it the worst performer in the firm's transport coverage for the year. This sharp downturn was a reaction to what the research firm called a 'small 3Q miss and large 4Q guidance cut.' The analyst noted the substantial reset in the stock's price as a key reason for the improved rating, though no new price target was issued.
Is now the time to buy RXO? Access our full analysis report here.
What Is The Market Telling Us
RXO’s shares are extremely volatile and have had 35 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was about 23 hours ago when the stock dropped 11.9% on the news that the broader U.S. stock market declined amid investor caution and a pullback in technology stocks.
The main story? Investors are cashing in on a good run and feeling a bit cautious. After a fantastic run, many of those high-flying AI and technology stocks saw investors take profits: selling shares to lock in their gains. This is often called a "market rotation." Money is moving out of the red-hot tech sector (which some worry has become too expensive) and into other parts of the market that investors may currently deem more stable or reasonably-priced.
There's a secondary reason for the cautious mood: The long government shutdown came to an end. Though it's typically interpreted as good news, it also means a flood of delayed economic reports will be released. For weeks, investors were "flying blind" without key updates on the economy's health, like inflation data and the jobs report. In typical "sell the news" fashion, investors may also be taking profits and selling in anticipation that the new data would potentially give the Federal Reserve reasons to slow or even pause future rate cuts.
RXO is down 53.5% since the beginning of the year, and at $11.00 per share, it is trading 64.4% below its 52-week high of $30.88 from November 2024. Investors who bought $1,000 worth of RXO’s shares at the IPO in October 2022 would now be looking at an investment worth $523.76.
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