Market Overview

Bernstein: Amazon Flex Is No Threat To FedEx, UPS

Bernstein: Amazon Flex Is No Threat To FedEx, UPS
Related AMZN
China Internet ETF: A Buy The Dip Opportunity?
Cold Start: Worries About Hawkish Fed, Rising Prices Seem To Weigh On Sentiment
Dow Jones Futures: Key Week For Stock Market Rally; Alibaba Singles' Day Growth Slows (Investor's Business Daily)
Related UPS
Introduction To Precision Railroading, Part 3: Where Do We Go From Here?
UPS To Wind Down LTL Business Until Outcome Of Contract Vote Decided
UPS avoids strike as freight workers approve new labor contract (Seeking Alpha), Inc. (NASDAQ: AMZN) investors are always on the lookout for the company’s next disruptive business, and some believe it could be parcel delivery. Amazon Flex is not a major threat to United Parcel Service, Inc. (NYSE: UPS) and FedEx Corporation (NYSE: FDX), according to Bernstein analyst David Vernon. 

Amazon Flex is Amazon’s crowdsourced delivery model that could potentially challenge FedEx and UPS, but Vernon said Flex has major limitations.

“We see limited risk of full-scale diversion of volume from traditional carriers to crowdsourced models due to the constraints required to build efficient flex blocks and limitations on supply of ‘right-timed’ labor,” the analyst said in a Thursday note. 

The pay rate for Amazon Flex drivers is not high enough to stimulate full-time job growth, Vernon said. Amazon Flex drivers earn about $11 per hour on average, but take home only about $5 per hour after costs are factored in, he said. 

Crowdsourced delivery services are most effective during peak holiday delivery season and can actually serve to alleviate some of the holiday pressure on FedEx and UPS, according to Bernstein. 

After exploring the impact Amazon Flex is having on the delivery business, Vernon concluded that FedEx and UPS are both undervalued at the moment based on excessive fear of Amazon.

“We do not see the growth of crowdsourced delivery models as destabilizing to the capacity and pricing picture for residential small package delivery,” he said.

In an email follow-up with Benzinga, an Amazon representative disputed Bernstein's wage estimates for Amazon Flex drivers and said Flex drivers earn between $18 and $25 per hour for package delivery.

Bernstein has Outperform ratings for FedEx and UPS and price targets of $296 and $137, respectively.

Related Links:

Report: Trump Is 'Obsessed With Amazon' — And The Stock Is Falling 

The Amazon Tax Predicament

Latest Ratings for AMZN

Oct 2018JefferiesMaintainsBuyBuy
Oct 2018Bank of AmericaMaintainsBuyBuy
Oct 2018BarclaysMaintainsOverweightOverweight

View More Analyst Ratings for AMZN
View the Latest Analyst Ratings

Posted-In: Bernstein David VernonAnalyst Color Price Target Reiteration Top Stories Analyst Ratings Best of Benzinga


Related Articles (AMZN + FDX)

View Comments and Join the Discussion!

Latest Ratings

AMNBKeefe Bruyette & WoodsUpgrades43.0
ARRSGoldman SachsUpgrades30.5
CADEKeefe Bruyette & WoodsUpgrades32.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Petrobras Responds To Brazilian Trucking Strike — And Receives 3 Big Downgrades

President Trump Cancels Summit With Kim Jong Un