QXO, Inc. (QXO): A Bull Case Theory

Yahoo

24-04-2025

We came across a bullish thesis on QXO, Inc. (QXO) on Value Investing Subreddit Page by Frankxdxdxd. In this article, we will summarize the bulls' thesis on QXO. QXO, Inc. (QXO)'s share was trading at $12.46 as of April 23rd.
A construction site with workers wearing hard hats and safety vests, installing roofing materials.
QXO, led by renowned serial entrepreneur Brad Jacobs, is embarking on a bold plan to transform the $800 billion U.S. and Western European building products distribution industry by leveraging technology and consolidation. Jacobs, who has a long history of building multibagger companies like XPO, GXO, RXO, United Rentals, and United Waste Systems (now Waste Management), is applying his proven M&A-driven playbook to one of the largest and most fragmented industries. With only 50% of the market held by major players and over 20,000 small businesses, the industry offers an immense acquisition runway. QXO is targeting $50 billion in annual revenue over the next decade—equivalent to just 6% market share—through a combination of organic growth and highly accretive acquisitions. Jacobs has personally committed $900 million to QXO, aligning his interests with shareholders, and is known for incentivizing his executive teams with equity tied to total shareholder return.
Jacobs sees a compelling long-term opportunity in this sector driven by several secular tailwinds. The industry has delivered 7% annual growth over the past five years, underpinned by largely non-discretionary demand. Repairs to aging residential, commercial, and infrastructure properties cannot be deferred—if a roof leaks, it must be fixed. U.S. homes now average 42 years old, commercial buildings over 50 years, and infrastructure like roads and bridges exceed 70 years, setting the stage for sustained investment. In fact, the U.S. government is expected to allocate up to $2 trillion toward infrastructure renewal in the coming decade. This sets up a favorable macro backdrop for QXO's growth strategy.
Technology adoption in this sector remains nascent, creating a major value creation lever. Few distributors are tech-enabled, and many lag in e-commerce, inventory optimization, logistics, and automation. Jacobs aims to address these inefficiencies through digital platforms, AI-powered pricing, and automated distribution centers—initiatives that drive margin expansion and free cash flow conversion. After the initial technology and automation CapEx, the business becomes low CapEx-intensive, allowing for high EBITDA-to-FCF conversion.
QXO's first major move is the $11 billion acquisition of Beacon Roofing Supply (BECN), which values the company at 10.5x EV/EBITDA—considered fair by many analysts. BECN is a market leader in roofing, waterproofing, and exterior building products, operating nearly 600 branches across the U.S. and Canada. Importantly, most of its products are domestically produced, offering tariff insulation. Roofing demand is robust, with 80% of revenues coming from repair and replacement—largely immune to economic cycles. BECN has also been scaling its digital channel, which now accounts for 16% of sales and is growing 20% annually. Its proprietary TRI-BUILD brand, which delivers higher margins, now contributes 10% of sales. With a growing waterproofing segment and a consistent record of share buybacks—23% reduction since early 2022—BECN fits seamlessly into Jacobs' playbook.
Ultimately, QXO is a classic 'bet-on-the-jockey' story. Brad Jacobs' track record, shareholder alignment, and strategic vision provide a compelling backdrop to what could be another multi-bagger in the making. With powerful industry tailwinds, an under-digitized competitive landscape, and a fragmented acquisition pool, QXO is poised to disrupt a massive industry and create substantial long-term shareholder value.
QXO, Inc. (QXO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 33 hedge fund portfolios held QXO at the end of the fourth quarter which was 31 in the previous quarter. While we acknowledge the risk and potential of QXO 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 QXO 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 was originally published at Insider Monkey.