FedEx Seen Rising Over 20% as It Beats Amazon
Amazon Inc. (AMZN) has a knack for entering new markets and giving the competition a run for its money. But when it comes to who will win in the shipping delivery market, it’s shipping veteran FedEx Corp. (FDX) that may have the upper hand as Amazon prepares to launch its own delivery service.
FedEx has a superior cost structure in the eyes of Bernstein analyst David Vernon, who upgraded the Courier’s shares to outperform in a report to customers issued last Friday, according to CNBC.
Vernon also raised its price targets for FedEx. The stock has already gained nearly 4% since it made its prediction last Thursday. With this in mind, Vernon’s targets imply one-and two-year increases of 14% and 23%, respectively, at the close of trading on Monday.
Bernstein’s report also pointed to the attractive stock valuation and that FedEx is currently enjoying the fastest earnings growth in its history, according to a separate CNBC article. The company is currently trading at a forward price (P / E ratio) of 15.02. (To read more, see: UPS, FedEx fears on Amazon are exaggerated: JPMorgan.)
While Amazon is often credited with having a low-cost business model because of its ecommerce platform and technological prowess, Vernon argues that when it comes to delivery service, “Amazon clearly has a cost.Even though Amazon Prime members enjoy “free” shipping, the price of that Prime membership went up 18% in January from enero 10.99 a month to $ 12.99 a month.
One of the advantages FedEx has, as the transportation labor market tightens due to growth in e-commerce, is an established network that is “uniquely positioned to deliver that next decade of growth,” Vernon wrote in his report. In the absence of that established network, Amazon will have to continue to pass on costs to customers.
FedEx has also done a good job recently by investing in the expansion and automation of its centers, reducing labor costs and improving the speed of its service. Speed of Service is where FedEx CEO Fred Smith believes his company has a definite competitive advantage.