Ricardo Pillai
3 min read
We came across a bullish thesis on GXO Logistics, Inc. (GXO) on Substack by P14 Capital. In this article, we will summarize the bulls’ thesis on GXO. GXO Logistics, Inc. (GXO)'s share was trading at $41.07 as of May 14th. GXO’s trailing and forward P/E were 66.24 and 17.06 respectively according to Yahoo Finance.
A warehouse worker unloading a line matrix printer in the background, showing the company's transportation and logistics capabilities.
GXO Logistics (GXO) is cementing itself as a premier third-party logistics (3PL) player, leveraging its asset-light, contract-driven model to deliver resilient performance in a challenging macro environment. Its Q1 FY25 results showcased strong momentum, with revenue growing 21.1% year-over-year to $2.98 billion and EPS of $0.29 beating estimates. The company reaffirmed its full-year outlook, underpinned by robust EBITDA-to-free-cash-flow conversion and a record $2.5 billion sales pipeline.
A standout catalyst is GXO’s landmark $2.5 billion, 10-year contract with the UK’s National Health Service—its largest deal to date—highlighting growing demand for outsourced logistics. Additional wins with Siemens Healthineers and $732 million in incremental FY25 organic revenue further bolster long-term visibility. Notably, 41% of new wins were first-time outsourcing deals, with 39% involving automation and 42% tied to e-commerce, reinforcing secular 3PL growth. The Wincanton acquisition has added meaningful scale, especially in the UK, where revenue jumped 52% year-over-year. Pending regulatory outcomes are favorable either way, and $58 million in expected synergies are set to improve margins.
Concerns around customer churn are offset by renewals with core enterprise clients, and elevated inventories in North America suggest backloaded strength later in the year. GXO’s low China exposure and heavy UK/Europe revenue mix position it defensively amid geopolitical volatility. Despite near-term margin pressure from Wincanton’s open-book model, integration benefits are expected to normalize costs. With $12.87 billion in projected FY25 revenue, expanding EBITDA, and significant share buybacks, GXO offers compelling upside. A base-case $60/share target implies a strong risk/reward, with downside limited to $29 and further gains driven by automation, outsourcing, and disciplined execution.
GXO Logistics, Inc. (GXO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 49 hedge fund portfolios held GXO at the end of the fourth quarter which was 33 in the previous quarter. While we acknowledge the risk and potential of GXO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GXO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
