FedEx Corp. shares and United Parcel Service Inc. recovered on Wednesday as investors cheered the news from Amazon.com Inc. and interrupted a “test” of a competitive service.
rose by 8.6% in the midday trade. It has risen 39% since the close on March 1
rose 6.2% and traded 15% above the closing price on March 12 of $ 86.17, the lowest closing price since September 2013.
The Wall Street Journal reported late Tuesday, citing individuals familiar with the matter, that Amazon
The service, known as Amazon Shipping in June, was discontinued in June as the e-commerce giant needed its people and capacity to handle the surge in its own orders. The service, which was only available in a few cities, was in direct competition with FedEx and UPS because it would deliver packages directly from businesses to consumers rather than being shipped from Amazon warehouses.
Amazon announced on Wednesday that it regularly examined a number of factors in its services and, after careful consideration, decided to stop testing its Amazon shipping program in the United States only.
Brian Ossenbeck, analyst at J.P. Morgan said that while it is no surprise that investors have responded positively to the news, his view of Amazon’s threat to parcel providers remains unchanged.
“The news is somewhat more positive for FedEx because it is no longer being delivered to Amazon and is considered to be at risk for direct competition,” wrote Ossenbeck in a message to customers. “However, we expect UPS to benefit from it in the news as well [that] The largest customer has discontinued a competing service for non-Amazon volumes. However, we assume that Amazon will continue to store its own supplies over time. “
He acknowledged that this news confirmed the view of the FedEx and UPS bulls, but also noted that the cessation of the service was a question of “timing” as this increased with the significantly increased demand for orders from Amazon customers in the COVID linked to -19 pandemic.
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“Error replicating the AWS [cloud] The platform in logistics does not rule out another attempt this time, especially if the shipping costs for Amazon are increasing faster and faster and the market share in e-commerce continues to grow, ”wrote Ossenbeck.
Ossenbeck rates FedEx and UPS stocks as neutral.
Ken Hoexter, an analyst at BofA Securities, believes that the “emerging” Amazon shipping service for UPS and FedEx, both classified as purchases, has been positive. However, analyst Justin Post said the pause was likely to be a “temporary step in unusual times” given the capacity. Post continues to see the service as a long-term opportunity for Amazon, as the company should be able to increase the utilization of its existing shipping network.
FedEx stocks have fallen 20% in the past three months and UPS stocks have lost 15%. Over the same period, Amazon’s stock gained 7.2% during the Dow Jones Transportation Average
lost 26% and the Dow Jones Industrial Average
has fallen by 19%.