How to Trade FedEx's 20% Surge Amid Drone Delivery & EV Testing
Logistics firm FedEx's share price soared more than 250% higher over the pandemic period. Since reaching a record high in June 2021, the stock has moved down nearly 40%.
While the company posted strong earnings throughout 2020 and 2021, recent earnings took a hit due to higher fuel costs and labour shortages due to Covid.
As you’ll see further down this article, hedge funds have also been increasing their positions in the company during the last quarter. Learn how to trade FedEx shares below.
|Symbol for Invest.MT5 Account:
|Date of Idea:
|7 April 2022
|1 - 6 months
|Position Size for Invest.MT5 Account:
- The Invest.MT5 account allows you to buy real stocks and shares from 15 of the largest stock exchanges in the world.
All trading is high risk and you can lose more than you risk on a trade. Never invest more than you can afford to lose as some trades will lose and some trades will win. Start small to understand your own risk tolerance levels or practice on a demo account first to build your knowledge before investing.
Why Trade FedEx Stock?
FedEx is an American multinational logistics firm best known for its air delivery service which was one of the first major shipping companies to provide overnight deliveries. The company is one of the top contractors of the US government and has subsidiaries providing a variety of other services in transportation and e-commerce.
Last month, the company posted a lower-than-expected quarterly earnings report as the company was affected by labour issues and the Omicron outbreak. On top of this, FedEx founder Fred Smith announced he is stepping down as chief executive after 50 years at the helm.
But, this hasn’t stopped analysts to look at the long-term prospects of FedEx and issuing buy ratings on the stock in the past month. Furthermore, in the last quarter alone hedge funds built bigger positions in FedEx by purchasing more than 3.4 million shares.
Global macro trends in shopping are likely to underpin demand for FedEx’s services
As we move into a more globalised society, global macro trends in shopping and e-commerce are likely to keep FedEx’s services in demand. As more and more people purchase goods online from around the world, operators who provide fast, worldwide shipping are likely to benefit.
Of course, FedEx is not the only player in the market with rivals UPS also a big name in the sector. However, in the latest earnings call new chief executive Raj Subramaniam stated they are “laser-focused on improving margins.”
The energy a new chief executive brings can help to revive underperforming divisions and help lift the stock price in time, especially as the focus is to generate 8.3% compound annual growth in its e-commerce market.
FedEx is due to start testing autonomous drone cargo delivery and EV trucks
FedEx and its rivals have long been trying to innovate its services to provide better profits and margin. FedEx has partnered with Elroy Air’s Chaparral autonomous, electric vertical take-off and landing (VOTL) drone.
Testing is due to start in 2023 with shipments being moved between FedEx sorting locations to begin with. The drones are able to autonomously pick up 300 to 500 pounds of cargo and drop it to destinations up to 300 miles away.
FedEx has also partnered with Neolix, a self-driving logistics company based in China to capitalise on the trend towards autonomous truck deliveries.
Hedge funds have actively increased their positions in FedEx
According to TipRanks, the latest 13F filing report of 203 hedge funds submitted to the Securities and Exchange Commission (SEC) shows that hedge funds increased their holdings in FedEx by 3.4 million shares in the last quarter.
While many hedge funds are adding to their current exposure, there are also many new hedge funds purchasing new shares. This highlights a more optimistic tone in the long-term prospects for FedEx’s share price.
Source: TipRanks, 6 April 2022
FedEx Stock Forecast - What do the Analysts Say?
According to analysts polled by TipRanks for a FedEx stock forecast in the last 3 months, there are currently 18 buy, 3 hold and 0 sell ratings on the stock. The highest price level for a FedEx stock forecast is $343.00 with the lowest price target at $250.00.
The average price target for a FedEx stock forecast is $295.75 which represents near 38% upside from current levels, at the time of writing.
Analysts at UBS and Barclays provided buy ratings on the stock only 18 days ago with price targets at $310.00 and $320.00 respectively.
Source: TipRanks, 6 April 2022
An Example Trading Idea for the FedEx Stock Price
An example trading idea for the FedEx stock forecast could be as follows:
- Buy the stock on a break above $242.00 to allow for current volatility.
- Target just below the average analyst price target at $295.00.
- Keep your risk small at a maximum of 5% of your total account.
- Time Line = 1 – 6 months
- If you buy 10 FedEx shares:
- If target is reached = $530.00 potential profit ($295.00 - $242.00 *10 shares).
It’s wise to remember that the share price is unlikely to go up in a straight line and it may even go much further down before it rises, especially considering the recent sell-off in global stock markets.
Therefore, be sure to exercise good risk management which is one of the most important aspects of trading successfully. You should always know how much you could potentially lose on a trade and the risks involved.
Another factor to consider is the commission as these can eat into your profits. With the Admirals Invest.MT5 account you can buy US stocks from $0.02 per share. This means buying 10 shares in FedEx stock would result in a commission of $0.20 ($0.02 * 10 shares).
There is a low minimum transaction fee of $1. So, the example trading idea above would result in a commission of just $1 overall!
How to Buy FedEx Stock in 4 Steps
With Admirals, you can buy shares in US companies like FedEx with a low commission of just $0.02 per share and a low minimum commission of just $1.
- Open an account with Admirals to access the Trader’s Room.
- Click on Trade on one of your live or demo accounts to open the web platform.
- Search for FedEx at the bottom of the Market Watch window and drag the symbol onto the chart.
- Use the one-click trading feature, or right-click and open a trading ticket to input your trade size, stop loss and take profit level.
Source: Admirals MetaTrader 5 Web. Past performance is not a reliable indicator of future results, or future performance.
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Do You See the FedEx Stock Price Moving Differently?
Remember that all analytics and trading ideas are based on the personal view and experience of the author.
If you believe there is a higher chance FedEx's share price will move lower, then you can also trade short from a CFD (Contracts for Difference) trading account which Admirals also provide.
This means you can trade long and short to potentially profit from rising and falling stock prices. Learn more about CFDs in this How to Trade CFDs article.
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