Amazon.com, Inc. AMZN said last week it expects to be the largest package delivery carrier in the U.S. by the end of 2021, if not in early 2022.
The Amazon Analyst: Morgan Stanley analyst Brain Nowak has an Overweight rating and a $4,000 price target for Amazon shares.
The Amazon Thesis:
How Amazon Stands to Benefit: Amazon has significantly expanded its fulfillment and logistics capacity over the last years as part of Amazon Logistics, analyst Nowak said in a note.
Amazon Logistics will ship an estimated 6.3 billion packages in 2021 compared to United Parcel Service, Inc.'s UPS estimated 5.5 billion packages, the analyst said. This implies Amazon Logistics will likely ship 66% of the volume of Amazon in the U.S., he added.
Amazon Logistics, the analyst said, can improve Amazon's shipping efficiency and lower shipping costs per unit. The logistics arm may have enough capacity by 2023 to move 75% of Amazon's U.S. volumes as well as another 22% of non-Amazon U.S. e-commerce volumes, according to the analyst.
Even if Amazon moves only 15% of non-Amazon e-commerce volumes by 2023, it could generate an incremental $1.4 billion of EBIT in 2023, Nowak said.
Related Link: Why This Analyst Thinks Amazon Can Surpass Walmart As The Largest US Retailer In 2022
Implications For FedEx, UPS: This marks another key inflection point in the competitive dynamics in the industry, Nowak said.
"What was once a UPS/FDX 'duopoly' had to contend with the swift rise of the USPS in the last decade and now AMZL is potentially soon to be the largest parcel carrier in the country," the analyst wrote in the note.
FedEx Corporation FDX and UPS could suffer from a reduction in potential leverage with customers if there are emerging alternatives, the analyst said.
Insourcing risk is increased, particularly for UPS, where Amazon accounts for 13% of the total revenues and a significantly higher percentage of U.S. volumes, Nowak warned. If Amazon Logistics is ramping up capacity at this pace, it should be in a position to insource the bulk of its volumes soon, he added.
Additionally, the capacity growth also lines up Amazon Logistics to potentially become a 3P competitor in the U.S., Nowak said.
AMZN Price Action: Amazon shares were edging down 0.18% to $3,437.36 at market close Thursday.
Related Link: Amazon, Facebook And 5 Other Internet Companies To Play The Top Tech Themes For 2021 And Beyond
Photo: Courtesy Amazon
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