Is Amazon Pulling The Rug Out From Under FedEx And UPS?

In the past, Amazon.com, Inc. AMZN’s explosive growth has been good news for shippers United Parcel Service, Inc. UPS and FedEx Corporation FDX. However, as Amazon grows it will continue to be become less reliant on FedEx and UPS. 

According to Bernstein analyst David Vernon, FedEx and UPS investors have nothing to fear.

“Assuming Amazon and other retailers continue to rely less on UPS and FDX, which is reasonable as density builds, the demand for e-commerce deliveries by the national carriers should still yield a reasonable 7-10% growth,” Vernon explains.

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Bernstein projects that, while FedEx and UPS’s share of e-commerce shipping will continue to decline, the e-commerce market will grow at a strong enough pace to more than offset the declining share.

In the past four years, FedEx and UPS’s share of Amazon package volume has dropped from around 60 percent to its current range of between 30 and 40 percent. However, Bernstein projects that e-commerce sales will grow 8-12 percent annually for the next 10 years.

Vernon believes that the market has currently priced in an overly negative outlook for FedEx and UPS.

Bernstein maintains a Market Perform rating on FedEx and Outperform ratings on Amazon and UPS.

Disclosure: the author holds no position in the stocks mentioned.