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Max Manturov

Max Manturov

Head of investment research regulated by CySec

FedEx Corp Stock: 34.70% Yield Potential with Virus Recurrence

Company Name: FedEx Corp
Ticker: FDX.US
Entry Price: $245
Target Price: $330
Projected Yield: 34.70%
Time Line: 3 to 6 months
Risk: High

About FedEx Corp

FedEx Corp (FDX.US) is a shipping company that provides a wide range of services for delivering goods and parcels in the US and beyond. In addition, FedEx provides additional support for documentation and other related business services.

What's the Idea?

Capitalize on the stock that may rise due to virus recurrence.

Buy FedEx Corp Shares >>

Why Trade FedEx Corp? 

Reason 1: New Consumer Habits

The pandemic gave Fedex some advantage, as this boosted ecommerce and online shopping. With on-site shopping restricted, ecommerce became the dominant and, in some places, the only way to shop. This helped FedEx gain a significant increase in demand for its services in 2020. According to EMarketer, the ecommerce market may continue gaining momentum with over 15% growth in the long term. Even thought there might be positive news on the vaccine, this is not going not change the current situation significantly, as many users will continue preferring online shopping. In the meantime, Fedex will be still gaining advantage with the virus recurrence and the lockdown still in place in many countries. This means the company will be able to maintain its current growth rate and continue expanding in the market moving forward.

Reason 2: Better Market Share and Competitive Edge

In late December, FedEx acquired ShopRunner, an ecommerce platform, with no details disclosed. ShopRunner offers merchant services to retail consumers, with over 100 chain partners, including Hudson's Bay Company, Kate Spade & Company, Under Armor, CB2, Cole Haan, and American Eagle Outfitters. ShopRunner will operate as a part of FedEx Dataworks, a new division of FedEx Services dedicated to leveraging FedEx's vast information base to improve digital and physical ecommerce transaction services. ShopRunner offers free two-day shipping, free returns, and other benefits when purchasing from one of the partners (basically, this is the same as Amazon's Prime service). The acquisition is intended to support FedEx ecommerce services and may play a major part in the competition against Amazon.

Reason 3: Good Financial Position and High Value of Current Assets

During the pandemic, FedEx financial results were quite good: in the first six months of FY 2020, the earnings were boosted by 16% to reach $39.90B, while the operating margin increased from 4.56% to 7.66%, and the operating profit amounted to $3.06B. The net profit margin also increased to 6.2%, while diluted EPS changed from $4.97 to $9.26.

In 2020, FedEx increased the amount of cash on its balance sheet to $8.34B, with the debt burden changing insignificantly, as Net Debt to EBITDA is only 1.87x. The company has no liquidity issues, with operating cash flow for the first six months of the year being $5.23B.

In 2020, the company value increased by 65%; however, it is not overvalued, with EV/S, EV/EBITDA, and current PE being at 0.95x, 7.94x, 26.63x, respectively. The stock is trading well for Forward PE and even cheaper than its closest competition, United Parcel Service (FedEx is 13x, while UPS is 18.70x).

In late December, major investment banks also leveled up their outlook for FedEx stock: Goldman Sachs, Credit Suisse, and JPMorgan Chase believe the target price is at $356, $368, and $325, respectively.

How to Use the Idea

  1. Buy FedEx Corp stock at $245.
  2. Allocate no more than 2% of your portfolio amount. To build a balanced portfolio, you can use recommendations by our analysts. 
  3. Sell the stock when the price is at $330 per share.

How to Buy FedEx Corp?

If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.

After opening an account, you can buy shares in either of the following ways:

Freedom24 Web PlatformGo to the Web Terminal section, type FDX.US (FedEx Corp NYSE ticker) in the search box, and select FedEx Corp in the results. Open a secure session in the trading window on the right, select the number of shares you want to buy, and click Buy.

Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the search dialog that will show up, type FDX.US (FedEx Corp NYSE ticker) in the search box, and select FedEx Corp in the results. You will then see the stock in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of shares you want to buy and click Buy.

Buy FedEx Corp Shares >>

*Additional information is available upon request. Investment in securities and other financial instruments always involves risks of capital loss. The Client should make himself aware at his own accord, including to familiarize himself with Risk Disclosure Notice. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Commissions, fees or other charges can diminish financial returns. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and do not constitute an investment advice service. The recipient of this report must make their own independent decisions regarding any securities or financial instruments mentioned herein. Information has been obtained from sources believed to be reliable by Freedom Finance Cyprus Ltd or its affiliates and/or subsidiaries (collectively Freedom Finance). Freedom Finance do not warrant its completeness or accuracy except with respect to any disclosures relative to the Freedom Finance and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is indicative as of the close of market for the securities discussed, unless otherwise stated.

  • Sources of information

  • Recommendation Evaluation Methodology
    Freedom Finance analysts perform a three-stage analysis. They select a promising industry based on the latest news, statistics and industry-specific metrics. They assess the supply and demand situation and its future development dynamics. Industry’s investment attractiveness is mostly affected by the forecasted market growth rates; total addressable market, player concentration level and likeliness of a monopoly formation, as well as the level of regulation by various entities or associations.

    The assessment is followed by the comparative analysis based on the selected sample. The sample comprises companies with a market capitalization of over USD 1 billion, but there is space for exceptions (when the suitable level of liquidity for company’s securities is available on the stock exchange). The selected companies (peers) are being compared against each other based on multipliers (EV/S, EV/EBITDA, PE, P/FCF, P/B), revenue growth rates, marginality and profitability (operating income margin, net income margin, ROE, ROA), and business performance.

    Having completed the comparative analysis, the analysts carry out a more in-depth research of the news about the selected company. They review company’s development policy, information about its current and potential mergers and acquisitions (M&A activity), and assess the efficiency of company's inorganic growth and other news about it over the past year. The main objective at this stage is to identify the growth drivers and evaluate their stability, as well as the extent of impact they have on the business.

    Based on all the data collected, the analysts determine the weighted forecasted figures of company’s growth rates and proposed business marginality, which are used to calculate the company’s multiplier-based estimated value. The said value enables setting the stock price target and stock value growth potential.

    The expected timing of the idea implementation is set depending on the current market situation, volatility level and available forecasting horizon for industry and company development. The forecasting period is normally set between 3 and 12 months.