FedEx announced their quarterly earnings yesterday, missed on earnings and profits and warned Wall Street by slashing their 2020 profit outlook by $11/share, 25% lower than expectations. Needless to say the stock price dropped to their worst one day performance since 2008.
FedEx blamed a slowing economy due to the US-China trade tariff. But during this earnings call, they also acknowledged Amazon as a threat, which was a complete 180 from 10 months ago.
During a earning call in December, an analyst asked what was what is FedEx’s strategy to fend off competition from Amazon? The Chief Executive Frederick Smith said he thought Amazon is a wonderful “company” and it is a “good customer” of FedEx, but he didn’t see it as a peer competitor at this time, and for many reasons, he doubts it ever will be.
Meanwhile, Amazon was already leasing 40 cargo jets, with plans to lease up to 100 planes for Amazon Air routes that could overlap more than two-thirds of the volume flown by UPS and FedEx. According to Morgan Stanley, they believe Amazon Air represents 2% revenue lost for UPS and FedEx currently, by 2025 that revenue lost increases to 10%.
Concerns about Amazon competition were part of a “misunderstanding” and he doubted the e-commerce giant would ever be a “peer competitor,” Smith said in December.
‘We basically compete in an ecosphere that’s got five entities in it. There’s UPS, there’s DHL, there’s the U.S. Postal Service, and now increasingly, there’s Amazon. That’s who we wake up every day trying to think about how we compete against and give the best services to our sales force.’
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For the quite some time, the weekly demand at $143 has served as a floor,
but in the coming months, that I think it will be a different story. If and when the weekly demand at $143 is breached, look for price to make its way down to the monthly demand at $111.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
