FedEx Still a Blackjack Gamble ?

Man on scooter dodging traffic to deliver FedEx package

In 1971 Frederick Smith founded FedEx (FDX) with $84 Million of loans and inheritance. In 2 years when FedEx’s funds dwindled to $5,000, Smith was desperate and impulsively flew to Las Vegas and played blackjack with the last $5,000.

Amazingly, he turned the $5,000 into $27,000 for one more week of operation and motivation to obtain more financing.

About FedEx

FedEx Corp http://investors.fedex.com/investor-home/default.aspx with annual revenues of $70 Billion, provides individuals and businesses worldwide services under the respected FedEx brand. The world’s 450,000 most admired and trusted employees focus on safety and customer service.

Amazon Breakup

FedEx truck gets away from driver
FedEx Runaway Truck!

FedEx decided August 9, 2019 to make a U-turn and drive away from its longtime partner Amazon. Amazon’s massive size and continued growth forced FedEx to make the choice to scale with them and dwarf all of their long term business, or leave. Amazon represented 1.3% of FedEx’s revenues and was considered insufficiently remunerative.

FedEx will now focus on better servicing Amazon rivals Walmart (WMT) and Target (TGT). Their decision to drive away gives them better exposure to E-commerce companies worldwide who compete with Amazon.

Acquisitions

In 2016 FedEx acquired the Dutch company TNT Express to expand its growth network in Europe. TNT also has established trucking networks in the Middle East, Asia Pacific and South America.

FedEx announced August 29, 2019 that it agreed to acquire Cargex S.A., an international freight forwarding company. With over 25 years of focus on perishable goods and customs brokerage services in Columbia and opportunities in the key markets of the Latin American region – this acquisition complements the new FedEx express roundtrip Columbia-to-Miami flight.

FedEx Cares

FedEx plays an important role in their shipment donations under their FedEx Cares Delivering for Good Initiative. Live penguins, grizzly bears, reptiles and birds are all part of the hidden transport processes FedEx undertakes on a regular basis to exhibits, race tracks, zoos and aquariums. Photos of Bao Bao the giant panda plane-wrapped her journey to China with all the comforts of bamboo, apples, biscuits and sweet potato snacks.

Mom’s Takeaway

Sluggish performance isn’t new for FedEx investors. The stock has lagged behind the market for the last 3 years, losing about 1% a year since 2016, at the same time the Dow Jones has gained 15%. FedEx struggles have been partly because of fears that Amazon will start offering logistics services to other carriers.

In addition, they have been struggling to integrate the acquisition of TNT Express. Then, there is the impact of tariffs and “trade wars”.

The good news is FedEx has a competitive moat around it with over 700 planes and 180,000 vehicles handling 15 Million packages per day in 220 countries. They have strong management of CEO Fred Smith, a logistics-industry pioneer. A turn-around TNT, new E-commerce growth and overblown fears of new competition from Amazon, point to positive reasons to consider FedEx.

And, FedEx’s 52 week range is $147.82 – $259.25; maybe FedEx is revving up to accelerate from today’s bargain basement of $158.

Are You a Bull or Bear?

Wall Street bull and bear wrestling

Date August 31, 2019 — Stock FedEx (FDX) –Share price was $158.61

If you’re a Bullish Mom and think FedEx will go up, try the November 15th Expiration Date – CALL $155 Bid;  and $150 Ask strike prices.  Premium is $3.40 debit to pay = Long Call Vertical Spread on  www.TDAmeritrade.com

On the other hand, Mom, if you think FedEx is bearish and will go down, try the Expiration Date November 15th PUT $155 Ask;  and $150 Bid strike prices. Premium is $2.15 debit to pay = Long Put Vertical Spread on www.TastyWorks.com

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