Displaying items by tag: logistics

(Seattle)

That is an eye-opening thought, is it not? Some investors and analysts are arguing that in light of FedEx’s stock being so beat up, Amazon should swoop in and buy the company. Amazon has been building its logistics operations for years, but buying FedEx could give it a big boost if it wants to become a shipping giant. One analyst summarizes it this way, “FedEx is inexpensive at 10.6x and 6.5x forward price-to-earnings and enterprise value to earnings before interest, taxes, depreciation and amortization multiples, respectively … Amazon could make an accretive acquisition of the best global network for a fraction of the cost of building it themselves”.

FINSUM: As mind-boggling as Amazon owning FedEx sounds, this idea appears quite logical and plausible.

(Seattle)

It is no secret that President Trump is not a fan of Amazon. From his campaign right through until the present he has constantly threatened the company. Now he might have some fuel added to his fire. Amazon is currently putting tons of investment into expanding its logistics business, which will ultimately pose a threat to the United States Postal Service. Trump has already said that Amazon abuses USPS, and this will only embolden him. Trump wants USPS to double the rates it charges Amazon.

FINSUM: USPS lost almost $3 bn last year and hasn’t turned a profit in a decade. It does seem like Amazon is getting an unfair subsidy, but then again, it is up to USPS to set its rates.

(Seattle)

Last week Amazon made big news as it became clear that the company had plans to launch its own full scale delivery network both for its own shipments and for any retailer. The big players in the space are FedEx and UPS, and Amazon sees an opportunity to grab market share. However, the Wall Street Journal has published a “sense check” type of article showing that it would take a massive amount of investment and many years to gain the delivery scale to truly compete with UPS and FedEx. The WSJ reports that “FedEx has roughly 650 aircraft, 150,000 trucks, 400,000 employees and 4,800 operating facilities globally to handle about 12 million shipments a day”. Amazon has just a tiny fraction of that sort of infrastructure.

FINSUM: It is going to take Amazon several years, and a lot of patience from investors, to get in a position to compete with UPS and FedEx. We would never count the company out, but it is a distant goal.