Wells Fargo raised its price target for XPO (NYSE:XPO) to $205.00 from $147.00 and kept an Overweight rating on the logistics provider. The new target sits modestly above XPO's most recent share price of $185.62, which has climbed 25.33% over the past week and is close to the company's 52-week high of $200.13.
The research team highlighted XPO's relative outperformance after a recent pullback, noting that both first-quarter and 2026 targets established in their model exceeded expectations. Wells Fargo characterized its 2026 assumptions as conservative given the potential for macroeconomic improvement, an assessment that underpins the higher valuation.
A central pillar of the Wells Fargo thesis is XPO's operating ratio improvement story. The firm models 2026 performance with no volume growth while assuming 100 to 150 basis points of operating ratio improvement, and it identifies that progress in operating efficiency as a key driver for sustainable earnings-per-share growth over the medium term.
Wells Fargo's scenario analysis shows that if management were able to add 2 to 3 percentage points of volume on top of the operating-ratio improvements and other current assumptions, the company could reach roughly $5 of earnings per share. Under the same framework the bank projects a potential for $6.25 of earnings per share in 2027.
On valuation, Wells Fargo applied a roughly 30x multiple to its forward estimates. While the bank acknowledged this multiple appears elevated in isolation, it considered the level reasonable when compared with less-than-truckload peers that trade in the mid-to-upper 30s on similar macro assumptions.
Market data from InvestingPro included in the analysis show XPO trading at a price-to-earnings ratio of 68.01 and an EV/EBITDA multiple of 20.46. InvestingPro also flags that the stock appears materially overvalued relative to its Fair Value, and subscribers can access additional ProTips and detailed Pro Research content on the name.
Analyst activity across the sector has skewed positive in recent days, reflecting the company's stronger financial results and operational execution. The following note lists other broker moves cited in research coverage:
- BMO Capital raised its price target on XPO to $205 from $170 and maintained an Outperform rating, citing confidence in the company's margin-improvement strategy.
- Morgan Stanley shifted its target to $95 from $90, referencing an 11% beat on XPO's fourth-quarter EBIT versus the firm's estimate, while keeping an Underweight rating.
- TD Cowen lifted its target to $192 from $158, pointing to better-than-expected fourth-quarter results and strong tonnage in January.
- BofA Securities moved its target to $209 from $160 and maintained a Buy rating, attributing the hike to operational improvements and above-seasonal results in January.
- Benchmark raised its target to $165 from $150, retaining XPO on its Best Ideas list even while adjusting some estimates due to lower-than-expected volumes.
Collectively, these analyst actions indicate general positive sentiment among sell-side firms about XPO's recent performance and strategic direction, with several firms increasing targets and citing improved margins, tonnage, and execution.
For investors and market participants, the mix of a higher price target from Wells Fargo, recent analyst upgrades, and the stock's sharp short-term appreciation presents a complex picture. The firm’s modeling suggests that operating-ratio improvement alone can lift earnings expectations materially even without volume growth, and further volume expansion would add additional upside to earnings.
At the same time, valuation metrics and InvestingPro’s Fair Value assessment point to a possible disconnect between the current market price and intrinsic valuation metrics used by some research services.