Target price cut
Over the last few months, several research companies have trimmed their target price for FedEx (FDX) stock owing to its dismal quarterly performance and fiscal 2019 guidance, persistent weakness in its express business, and global trade slowdown concerns. On June 3, UBS Group (UBS) analyst Thomas Wadewitz cut his target for the stock to $136 from $148, citing the Chinese government’s probe into the wrongful delivery of Huawei Technologies’ packages—FedEx could be affected due to its exposure to China.
Wadewitz wrote, “It is reasonable to anticipate pressure on FDX’s business with a portion of its China outbound customers which adds to the current backdrop of weak international airfreight activity.” FedEx’s Chinese operations make up 6% to its total revenue. Morgan Stanley (MS) and Bank of America (BAC) have also trimmed their target prices, by $5 and $15, respectively, to $143 and $173.
Although analysts have lowered their target prices for FedEx stock, most are still bullish and recommend “buy.” Of the 28 analysts covering FedEx, ten recommend “strong buy,” nine recommend “buy,” seven recommend “hold,” one recommends “sell,” and one recommends “strong sell.” Their average target price of $204.81 implies a ~30% upside over the next year.
For exposure to the air freight and courier service industry, you could invest in the SPDR S&P Transportation ETF (XTN), of which 14.2% is allocated to the space. The ETF has gained 10.4% this year, underperforming the S&P 500 and Dow Jones, which have risen 14.6% and 11.4%, respectively.