whalesurfer

Thoughts?

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FedEx Stock Is So Cheap That Now Amazon Really Should Buy the Company, Analyst Says

By David Marino-Nachison
FedEx stock (ticker: FDX), well off the S&P 500’s pace over the last year, might be a bargain—for Amazon.com (AMZN), according to new research.

Loop Capital Markets analyst Anthony Chukumba, who has a Buy rating and a $2,200 price target on Amazon stock, on Tuesday wrote that if the tech and retail giant wants to become a shipping giant too, buying into the business could be a cost-effective way to do so.

It’s an argument Chukumba has made before—and Barron’s has covered. His latest take, however, puts things in the context of current valuations.

“FedEx is inexpensive at 10.6x and 6.5x forward price-to-earnings and enterprise value to earnings before interest, taxes, depreciation and amortization multiples, respectively,” Chukumba wrote. “Amazon could make an accretive acquisition of the best global network for a fraction of the cost of building it themselves.”

FedEx stock, recently about flat at just under $174, is off nearly 8% in January.

It has fallen some 35% over the last 12 months—principal competitor United Parcel Service (UPS) also dropped, though not quite as much—amid concerns that the battle to compete with Amazon, leading to expensive investments in capacity, was too big a drag on profits.

Amazon, in short, is now widely seen more as a disruptive threat to the shipping companies than a package-bearing boon. (FedEx’s CEO, for his part, doesn’t agree; he called the notion “fantastical” last month.)

Some analysts think FedEx shares can recover on their own. Factset’s average price target is around $223, some 28% above current levels. Chukumba, however, thinks a protracted battle won’t end well for the shipping giants.

“If Amazon does indeed cross the Rubicon to become a serious threat to UPS and FedEx, the former will draw a competitive response, likely in the form of more aggressive pricing by the incumbents, targeting Amazon customers in key lanes, and large price hikes on Amazon itself,” he wrote. “Clearly this is bad for all players.”

Email David Marino-Nachison at [email protected]. Follow him at nonachison and follow Barron’s Next at @barronsnext.

https://www.barrons.com/articles/fed...ys-51548781426

Birdsmash

AMZN would be better served buying DHL which has a more extensive international network.

FlyAstarJets

That ship has sailed, not gonna happen.

whalesurfer

DHL is owned by the Deutsche Post AG and the German government owns a large share of the group (~20% ownership via KfW).

In other words, to buy DHL Fedex would have to deal with the German government. ..and why would the German government want to sell DHL to one of its main competitors?

Birdsmash

AMZN isn’t a competitor to Deutsche Post AG. If DHL and the German government are looking for an exit strategy to ever increasing labor costs and pension liabilities, selling DHL would be an answer. I’m aware of the employment protections that are common in Europe. Any kind of deal could be structured to protect those currently employed. I’m sure FDX had to make similar guarantees with the purchase of TNT. The deal could also include whatever guarantees Deutsche Post needs for their packages.

An AMZN purchase of DHL would also give them the European Air Transport (EAT) Air network and 49% ownership in Polar. I think DHL has other partial ownership in some of their other contractors?

All it would take is many $billions and AMZN would have an instant worldwide network.

Reactivity

[QUOTE=whalesurfer;2752239]Thoughts?

"Analysts" write a lot of clickbait.

Airplaneflyer11

Amazon won't buy Fed for one reason....pay. Again and just like always why would they spend more for pay and benefits at Fed when the ACMI world is moving the freight at nearly %100 and begging for more.

JonnyKnoxville

Care to expand on why you think that ship has sailed?

It seems very plausible to me that Amazon could buy DHL, buy a large portion of DHL, or create some king of joint venture with DHL in the future.

G550Guy

You don’t understand EU labor laws.... you don’t get to protect one group while you Fannie rape the others. They don’t play over here in Europe when it comes to workers rights, which explains why they are all basically socialist when it comes to benefits. Brussels would never allow Amazon to “contract out” hundreds of thousands of jobs so they can bypass paying for the all benefits employees get.


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Birdsmash

You don’t think the EU is desperate to find decent, albeit lower-end jobs for all of the immigrants they have let in? Jobs for that group would solve potential unrest and relieve the social system. AMZN is growing rapidly in Germany (their 2nd largest market behind the US). Imagine if they could continue that growth throughout the rest of the EU.