Analyst: Sell FedEx on Macro Risk

The shipping stock is set for its worst week since late December

Apr 26, 2019 at 9:56 AM
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UBS downgraded FedEx Corporation (NYSE:FDX) to "sell" from "neutral," and slashed its price target by $10 to $161 -- a nearly 15% premium to last night's close at $188.87. Analyst Thomas Wadewitz cited slowing Asian airfreight and German factory activity as signs of a "challenging environment for Fedex’s International Package business," while weak earnings from UPS (UPS) this week underscored a "mixed macro backdrop."

In reaction, FDX stock is down 1.5% to trade at $185.97, putting the shares on track for their worst week since Dec. 21, down 6.1% so far. This technical weakness echoes the equity's longer-term trend, with FedEx down 27% from its mid-September peak at $259.25. And while the shipping name is well off its late-December low near $150, this rebound recently stalled near the round $200 mark -- home to an early December bear gap and its 160-day moving average.

Outside of a rare surge in bearish betting yesterday, activity in FDX's options pits has been unusually bullish in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 1.81 ranks in the 72nd annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

This optimism is seen elsewhere, too, with 11 of 18 analysts maintaining a "buy" or better rating on FDX, while the average 12-month price target of $208.48 stands at a 10.4% premium to current levels. A continued shift in sentiment from options traders or analysts could create even stiffer headwinds for FedEx stock.

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