We recently compiled a list of the 10 Best TaaS Stocks to Invest in According to Hedge Funds. In this article, we are going to take a look at where GXO Logistics, Inc. (NYSE:GXO) stands against the other TaaS stocks.
Market experts opine that the transportation world is surrounded by tech-infused transformation, which creates significant opportunities for investors to go long on TaaS (transportation-as-a-service) stocks. The digital transformation that is being experienced by the transportation sector continues to make delivery services more accessible and customized.
As per Introspective Market Research, factors including the need for on-demand, affordable, and eco-friendly transport solutions are expected to drive the growth of the transportation-as-a-service market.
Technological advancements including self-driving cars are some of the prominent factors, with healthy improvement in connectivity. Smart cities and the application of loT, primarily in the transportation sector, should also act as contributing factors.
How Technological Advancements Will Drive Growth of the TaaS Market?
The TaaS market saw a transformative shift over the recent past, courtesy of the integration of Artificial Intelligence (Al) and Machine Learning (ML). Al-powered systems tend to optimize fleet operations by analyzing real-time and historical data, predicting vehicle demand, and suggesting efficient routes. ML algorithms focus on analyzing user behavior, preferences, and travel history to offer recommendations. Therefore, both the technologies, Al and ML, have transformed demand forecasting and predictive analytics.
As per Successive Digital, deep learning models, mainly Recurrent Neural Networks (RNNs) and Long Short-Term Memory (LSTM) networks, are proficient enough to capture temporal dependencies in data, which helps in demand forecasting. Notably, ML models like ARIMA (Autoregressive Integrated Moving Average) and Prophet are used to predict future demand by studying time-series data.
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Key Trends to Watch Out in 2025
One of the most important trends likely to drive the growth of the TaaS market in 2025 is the rapid adoption of EVs. The global push towards sustainability continues to support the growth of the EV market. Introspective Market Research believes that stringent emission standards set by governments and incentives provided for EVs continue to support the adoption. Furthermore, the development of battery systems focused on enhancing the driving range and cutting down the cost of EVs should make them affordable to consumers.
Next, Mobility as a Service (MaaS) integration should continue to fuel growth in the TaaS market. MaaS platforms focus on the convenience of users by offering a one-stop app where people can locate modes of transport such as buses, trains, bicycles, ride-hailing, etc. As per Introspective Market Research, the evolution of digital technologies like real-time data and analytics, mobile applications, and loT supported the growth of MaaS. These technologies focus on integrating and managing different forms of transport services.
Our Methodology
To list the 10 Best TaaS Stocks to Invest in According to Hedge Funds, we conducted extensive research and scanned through several online rankings. After getting an initial list of 25-30 stocks, we filtered out the ones having high hedge fund holdings. Finally, the shortlisted ones were ranked in ascending order of their hedge fund sentiment, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A fleet of trucks leaving a depot, loaded with consumer goods, representing the companies logistical services.
GXO Logistics, Inc. (NYSE:GXO)
Number of Hedge Fund Holders: 33
GXO Logistics, Inc. (NYSE:GXO) is a global leader in contract logistics, specializing in order processing for online retailers, including inventory picking, packing, and shipping to meet fast delivery demands. By leveraging advanced technology and a vast network of carriers, the company provides logistics solutions without owning the transportation assets themselves. As a result, the clients can access scalable and flexible transportation services tailored to their specific needs, which reduces the need for significant capital investment in transportation infrastructure.
GXO Logistics, Inc. (NYSE:GXO) generates revenue via long-term contracts with its clients. It provides 2 contract types: open-book (cost-plus) and hybrid closed-book, which is a blend of cost-plus and fixed-price elements.
The open-book (cost-plus) is a type of pricing structure that ensures transparency between GXO Logistics, Inc. (NYSE:GXO) and its clients regarding the costs incurred. The hybrid closed-book model combines elements of both closed-book and open-book pricing approaches. This model provides flexibility in pricing while balancing cost transparency and operational efficiency. These pricing structures offer prospects for stable margins and revenue visibility.
Wall Street analysts believe that GXO Logistics, Inc. (NYSE:GXO) is well-placed to achieve growth in 2025 as it will benefit from the megatrends of e-commerce growth and the increasing complexity of supply chains. In Q3 2024, the company secured approximately $226 million in new business, bringing the YTD total to ~$750 million. Notably, over half of these new contracts were in e-fulfillment, underscoring the growing demand for e-commerce logistics solutions.
With healthy international exposure, GXO Logistics, Inc. (NYSE:GXO) is likely to also benefit from outsourcing trends. As outsourcing trends grow across industries, the company’s revenues will be fueled by its focus on automation, sustainability, scalability, and tailored solutions.
Mar Vista Investment Partners, LLC, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“Although we believe in GXO Logistics, Inc.’s (NYSE:GXO) long-term growth outlook for logistics and warehouse automation, we decided to sell our investment to make room for investment opportunities with what we believe to be stronger, long-term expected returns.”
Overall GXO ranks 5th on our list of the best TaaS stocks to invest in according to hedge funds. While we acknowledge the potential of GXO as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued 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.
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Disclosure: None. This article is originally published at Insider Monkey.
