What’s Next for the FedEx-Amazon Relationship

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Both FedEx Corp. (NYSE: FDX) and Amazon.com Inc. (NASDAQ: AMZN) shares took a dip on Wednesday after former announced that it will end its ground-delivery contract with the latter at the end of the month. This comes a couple of months after FedEx announced that it killed part of its deal to deliver packages for Amazon via air transportation.

Back in June, FedEx specifically, said that it is ending its express U.S. shipping contract, which only affected air services. At that time, FedEx said it was a “strategic decision” that would not affect its other contracts with Amazon, although this does not seem to be the case now.

Also at that time, FedEx noted that less than 1.3% of its total revenue was attributable to e-commerce giant during the 2018 calendar year.

Amazon combated FedEx’s plan in June by announcing a Delivery Service Partners program in an effort to attract entrepreneurs who can create their own local delivery networks with up to 40 vans each. There has been no word yet on how Amazon will combat this most recent strategic move by FedEx.

It is worth pointing out that Amazon already has expanded its air fleet and has some plans going forward. Amazon also has a $1.5 billion hub opening in northern Kentucky in 2021, where it’s expanding its Amazon Air fleet to include 50 planes. Amazon said its air network can make “two-day shipping possible almost anywhere in the U.S.”

Shares of FedEx traded down about 2% on Wednesday, at $157.89 in a 52-week range of $150.68 to $259.25. The consensus price target is $187.84.

Amazon was down about 1% to $1,769.72 a share. The 52-week range is $1,307.00 to $2,050.50.


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