Investing

This transport stock had a wild week after a short-seller attack, guidance cut and then a buyback

Key Points
  • XPO Logistics said Wednesday it was revising its forecast for earnings growth to a slightly lower range, and investors started selling the stock.
  • By the end of Thursday, XPO shares had dropped more than 26 percent after a short-seller issued a report raising questions about the company's management and financials.
  • On Friday, Stifel said the selling was "overcooked," and other analysts reiterated their ratings, though they cut their price targets.
Brad Jacobs, CEO, XPO Logistics
Scott Mlyn | CNBC

XPO Logistics is having a wild week.

After losing more than a quarter of their value on Thursday, shares of the Greenwich, Connecticut transportation company surged more than 15 percent in trading on Friday after the company announced plans to buy up to $1 billion of its shares.

If it holds, that would at least partially reverse a sharp sell-off that started Wednesday, when XPO adjusted its profit growth outlook for next year to a lower range of 12 percent to 15 percent. Just one month ago, executives had forecast growth of earnings before interest, taxes, depreciation and amortization of 15 percent to 18 percent.

But it was a negative report on the company by the short-selling firm Spruce Point Capital on Thursday that sent the shares tumbling more than 26 percent, their worst day ever. Spruce Point's report said XPO had "unreliable and dubious" financials, $4.7 billion in debt and an inability to generate sustaining free cash flow.

Granted, a short-seller benefits when shares of the company they have bet against go down. Spruce Point sees the stock going to zero, with "40% to 60% intermediate downside risk."

On Friday, Stifel analyst Bruce Chan reiterated his buy rating on the stock and said the sell-off was "overcooked." Global freight and transportation firms like XPO are seeing weakness amid concerns about economic recession. XPO executives could have handled the message better, though, he said in a note.

On Thursday, KeyBanc maintained its overweight rating but cut its price target to $85 from $110. And Bank of America cut its price target to $84 from $103. SunTrust Robinson Humphrey initiated the stock at a buy with an $83 price target.

XPO issued a statement Thursday after Spruce Point's report came out. It called the claims "baseless and an attempt to string together unrelated pieces of incorrect information to paint an inaccurate impression of the company."

As it stands now, the shares are down 24 percent for the week and more than 50 percent for the quarter.