For his final “Executive Decision” segment of Monday’s Mad Money program, Jim Cramer checked in with Brad Jacobs, chairman and CEO of XPO Logistics (XPO) . The company is spinning off divisions and breaking itself into two in order to unlock value. Shares of XPO trade at just nine times earnings.
Jacobs said XPO delivered another great quarter, with its highest revenues and earnings per share ever, yet investors still struggle to give shares the credit they deserve. By splitting into two, he said, there will be two, single-focus companies that should be a lot easier for Wall Street to value and appreciate.
“Our shares won’t be trading at nine times earnings for long,” Jacobs assured shareholders.
When asked about continuing supply chain disruptions, Jacobs explained that the labor shortage is starting to improve and goods are beginning to move again. However, with China locked down and Russia disrupting Europe, it may take awhile for some goods, like food and semiconductors, to work themselves out.
Let’s check out the charts and indicators.
In this daily bar chart of XPO, below, we can see that prices have been in a decline since August. XPO is trading well below the declining 50-day moving average line as well as the declining 200-day line. Trading volume has increased the past three months and could be interpreted as either traders getting out of the stock or the stock reaching a level where investors have decided to be more aggressive buyers.
The On-Balance-Volume (OBV) line has been in a decline since August and tells us that sellers have been more aggressive. The trend-following Moving Average Convergence Divergence (MACD) oscillator has crossed to the upside for a cover shorts buy signal.
In this weekly Japanese candlestick chart of XPO, below, we see a bearish picture. Prices are in a longer-term decline. No lower shadows are visible to suggest that prices are down to a level where traders are rejecting the lows. The slope of the 40-week moving average line is negative.
The weekly OBV line has moved sharply lower. The MACD oscillator is bearish.
In this daily Point and Figure chart of XPO, below, we can see a bearish chart and a potential downside price objective of $31.
In this second Point and Figure chart of XPO, below, we used weekly price data. Here the software projects a target in the $25 area.
Bottom line strategy: XPO could experience an upside trading bounce with the broad market but the overall picture from the charts and indicators is still bearish. After a potential bounce further declines are possible. I would sit this one out.
Get an email alert each time I write an article for Real Money. Click the “+Follow” next to my byline to this article.
