QXO stock rating initiated at Overweight by Morgan Stanley with $35 target

Investing.com - Morgan Stanley initiated coverage of QXO Inc (NASDAQ:QXO) with an Overweight rating and a price target of $35.00 on Tuesday. The stock, currently trading at $20.13, has demonstrated strong momentum with a 58% gain over the past six months, according to InvestingPro data.

The investment bank views QXO as an emerging building products distributor with plans to consolidate its way to more than $50 billion in revenue. Morgan Stanley identified the U.S. industrial distribution sector as a prime roll-up candidate due to its highly fragmented nature. With a current market capitalization of $13.56 billion and analysts forecasting 124% revenue growth for fiscal year 2025, QXO appears positioned for significant expansion.

The firm noted that the industry’s fragmentation has resulted in many sub-scale competitors unable to invest in technology-driven solutions. These technology investments can lower distributors’ cost to serve while improving customer profitability, potentially driving more wallet share to the distributor.

Morgan Stanley highlighted QXO’s market opportunity within an $800 billion total addressable market where no single player holds above mid-single-digit market share. The bank specifically mentioned QXO’s leadership under Brad Jacobs, describing him as "perhaps the best acquirer that US Industrials has ever seen" with a track record at companies including XPO, URI, and WM.

The investment bank justified its Overweight rating by noting QXO trades at a discount to premium U.S. distributor peers despite having what Morgan Stanley considers "best in class EBITDA CAGR." InvestingPro analysis suggests the stock is currently undervalued, with 12 additional exclusive insights available to subscribers, including detailed valuation metrics and growth forecasts.

In other recent news, QXO, Inc. reported its financial results for the second quarter of 2025, revealing adjusted earnings per share of $0.11. This figure significantly surpassed analyst expectations, which were set at $0.04. Additionally, QXO’s revenue reached $1.91 billion, exceeding the consensus estimate of $1.88 billion. These results highlight the company’s strong performance in the recent quarter. The earnings announcement was followed by a minor drop in the company’s share price during pre-market trading, though this movement is not the focus here. The financial community closely watches such earnings reports as they provide insights into the company’s operational health. As always, investors are encouraged to consider these developments when evaluating their investment strategies.

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