FedEx Rally Pauses
Shares in US multi-national delivery firm FedEx are trading a little lower pre-market on Thursday. The current pause will be of little frustration to holders of the company’s stock given the impressive 200%+ rally seen from the Q1 lows registered during the height of the pandemic.
FedEx shares have made a solid recovery. Price is boosted by a solid Q3 earnings beat. This is given the explosion in online shopping and deliveries which has grown in tandem with the ongoing lockdowns and social restrictions in place around the world.
The upcoming holiday period is typically a high demand period for Fedex. This is given the rise in Christmas deliveries which start around now. Due to current social restrictions, this year’s winter delivery season is forecast to see record parcel numbers.
However, there are concerns this year that the company is not positioned to benefit from the seasonal boom. Van shortages have hit the broader delivery industry as a whole.
Van Shortage Concerns
Vans have been in increasingly short supply over the year as a result of factory closures stemming from the Q1 lockdown and subsequent business failures. While big names such as FedEx will no doubt find a way around the issue, the result is that the company’s costs are likely to go up. This is because they will need to resort to more expensive options.
Wall Street has already voiced concerns over rising costs incurred by the company in its bid to increase delivery speed in order to cater to the rising demand over the year. Despite this, shares have risen firmly over the year. Investors remain focused on the booming demand for delivery services.
However, vehicle inventories are now causing a pause for thought among investors. This is coupled with the recent vaccine news which has been a double-edged sword for the stock. Although FedEx has benefitted from the improved risk environment which has lifted stocks, looking ahead to next year, delivery volumes could feasibly drop if economies begin to return to normal by Q2 (as planned).
FedEx Testing All-Time Highs
Shares in FedEx recently pierced above the 292.88 level resistance to trade all-time highs of 296.12 before reversing back under the level. With the RSI indicator flagging bearish divergence, there is the risk of a reversal lower here.
However, while price holds above the 274.35 level, the outlook remains skewed towards the continued upside. Below the 274.35 level, however, the focus turns to the 255.70 level support next.