Amazon (NASDAQ:AMZN) once again revived its shipping service known as Amazon Shipping, which it stopped during the pandemic. Amazon Shipping is in direct competition with the services offered by FedEx (NYSE:FDX) and UPS (NYSE:UPS), thereby posing challenges for these logistics leaders.
This service offers package delivery solutions to Amazon selling partners and retailers for orders placed on Amazon, their websites, and other selling platforms. However, to be eligible for Amazon Shipping, businesses must sell on Amazon.
While both FedEx and UPS have built out infrastructure and services to meet increased e-commerce demand, AMZN’s significant investments in its logistics capabilities will spur competition in the sector. Amazon is a high-volume package shipper, and the company has been developing and implementing its in-house delivery capabilities, which could adversely impact the revenue and market share of FedEx and UPS.
Further, in a recent development, Amazon is imposing a fee on sellers who sell on its platform but do not use its logistics and fulfillment services. The move will pressure merchants to opt for Amazon’s logistics services, presenting challenges for FDX and UPS.
Let’s look at what the Street recommends for these companies.
Is FedEx Stock a Good Buy?
FedEx’s management said earlier that Amazon is establishing its own network of hubs, vehicles, and aircraft, which could impact its top line and market share. Moreover, the firm is battling macro uncertainty, which is impacting volume growth.
Nonetheless, analysts maintain a bullish outlook on FDX stock as they expect the company to benefit from its cost-reduction initiatives. FedEx stock has 15 Buy and four Hold recommendations for a Strong Buy consensus rating. Nevertheless, analysts’ average price target of $272.94 implies a limited upside potential of 3.92%.
Is UPS a Good Stock to Buy Right Now?
UPS’ focus on high-quality revenues and driving productivity augurs well for growth. On the contrary, its high dependency on AMZN is a concern. For the year ended December 31, 2022, Amazon accounted for approximately 11.3% of its consolidated revenues. Thus, Amazon’s development of its logistics business is bad news for UPS shareholders.
With six Buy, nine Hold, and one Sell recommendations, UPS stock has a Moderate Buy consensus rating on TipRanks. Analysts’ average price target of $185.50 implies 8.33% upside potential from current levels.
