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Why Amazon Won't Be Able To Kill FedEx

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Why Amazon Won't Be Able To Kill FedEx

Cowen said in a note Monday that investor concerns regarding FedEx Corporation (NYSE: FDX) facing a potential threat from Amazon.com, Inc. (NASDAQ: AMZN) are overblown.

The firm believes the company is well-positioned to overcome new threats while continuing to improve long-term shareholder value thanks to solid investments and a strong management team.

As such, the firm rates shares of FedEx as an Outperform, given its belief that the company will benefit from increased e-commerce growth and global expansion related to its TNT acquisition. The price target for shares of the company is $240.

Analysts Helane Becker and Conor Cunningham see FedEx as being relatively insulated from the threat posed by the Amazon juggernaut due to the following reasons:

  • FedEx's ability to adapt to various economic environments.
  • The scale and geographically diverse aircraft fleet.
  • The ongoing IT investments and vast network of global distribution centers.
  • Brand recognition.
  • Seasoned management team.

The analysts noted that FedEx has consistently executed its long-term growth strategies to become a pioneer in global transportation and logistics services, with a 40-year revenue and operating income CAGR of 16 percent and 14 percent, respectively, since its IPO in 1978.

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Cowen sees the company's nimbleness as the key to its long-term success, thereby creating long-term shareholder value. Additionally, the firm said matching the global scale and fleet diversity of FedEx is an expensive proposition. The firm noted that the company's fleet of 657 long- and short-range aircraft consists of 12 different aircraft types, allowing FedEx Express to effectively reach more than 99 percent of global GDP on a daily basis. The company has a goal of 40 aircraft by the end of 2018, the firm said.

The firm believes it will be challenging for Amazon to achieve a similar discount factor.

"The global nature of FedEx's routes (particularly in China and India) offer an attractive growth opportunity for FedEx given the expanding middle class and ongoing ecommerce growth in those regions," the firm added.

Notwithstanding the positive picture, Cowen thinks FedEx's margins may be pressured in the near-term due to increased investments in its Ground business. The firm views any weakness in share price resulting from this increased investment as a buying opportunity.

Latest Ratings for FDX

DateFirmActionFromTo
May 2021Wolfe ResearchUpgradesPeer PerformOutperform
Apr 2021BerenbergMaintainsBuy
Apr 2021KeybancUpgradesSector WeightOverweight

View More Analyst Ratings for FDX
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