FedEx Corporation (FDX) shares rose nearly 1% after UBS upgraded the stock from Neutral to Buy with a price target of $187 per share, reflecting an approximately 20% premium to Monday's close. The move follows an announcement on Friday that Ground would handle a portion of Express residential deliveries to help lower costs and improve margins.
Analyst Thomas Wadewitz cited low expectations going into earnings as well as efforts to improve the business-to-customer (B2C) cost structure of its Express business for the upgrade. In addition, he believes that the company has multiple levers to drive margin expansion in Express with the backdrop of stabilization in the Ground business margins in fiscal 2021.
While the company's move could lower costs, JPMorgan Chase analyst Brian Ossenbeck disagreed with implications that it's the first step toward fully integrating Express and Ground. He believes FedEx shares will hold on to their recent gains and that the stock looks more attractive than United Parcel Service, Inc. (UPS), which faces pressure from Amazon.com, Inc. (AMZN).
From a technical standpoint, the stock rose to trendline resistance and the 200-day moving average at $158.56 before giving up ground later during Monday's session. The relative strength index (RSI) remains neutral with a reading of 57.37, but the moving average convergence divergence (MACD) experienced a bullish crossover. These indicators suggest that the stock has room to continue its bullish run-up.
Traders should watch for some consolidation within the price channel over the coming sessions. If the stock breaks out, traders could see a move toward resistance at around $170.00 over the coming weeks. If the stock breaks down, traders could see support near the trendline at $140.00 or prior lows just below those levels over the long term.
The author holds no position in the stock(s) mentioned except through passively managed index funds.