Watch out, UPS. Morgan Stanley estimates Amazon is already delivering half of its packages
Published Thu, Dec 12 201911:24 AM EST
Updated Thu, Dec 12 20192:43 PM EST
CNBC.com
Michael Sheetz @thesheetztweetz
Key Points
- Amazon Logistics is the e-commerce giant's in-house logistics operation.
- "Our AlphaWise analysis shows that Amazon Logistics already delivers ~50% of Amazon US volumes, focused on urban areas," Morgan Stanley said.
- The firm estimates Amazon Logistics will reach a volume of 6.5 billion packages per year by 2022, far exceeding its estimate for UPS at 5 billion packages per year and FedEx at 3.4 billion packages per year.
Amazon is already delivering about half of its own packages in the U.S., according to a Morgan Stanley estimate on Thursday, and will soon pass both United Parcel Service and FedEx in total volume.
"Our AlphaWise analysis shows that Amazon Logistics already delivers ~50% of Amazon US volumes, focused on urban areas," Morgan Stanley said.
Amazon Logistics is the e-commerce giant's in-house logistics operation. Morgan Stanley said Amazon Logistics "more than doubled its share" of U.S. package volumes from about 20% a year ago and is now shipping at a rate of 2.5 billion per year. For comparison, Morgan Stanley estimates UPS and FedEx have U.S. shipping volumes of 4.7 billion and 3 billion packages per year, respectively."
"We see more of this going forward as our new bottom-up US package model assumes Amazon Logistics US packages grow at a 68% [compound annual growth rate from 2018 to 2022]," Morgan Stanley said.
That would put Amazon Logistics at 6.5 billion packages per year by 2022, according to the firm, far exceeding its estimate for UPS at 5 billion packages per year and FedEx at 3.4 billion packages per year.
"To us, Amazon Logistics is already-large scale and with a fleet ~1/5 the size of competitors, it speaks to its ability to use density and technology to drive efficiency," Morgan Stanley said.
20% upside?
The firm says Amazon Logistics is more focused than its competitors on densely populated areas. According to Morgan Stanley's estimate, about 61% of Amazon Logistics' package volumes are from suburban areas, 28% are from urban areas, and just 11% are from rural areas. That makes Amazon Logistics' rural focus about half of its competitors, as the rest of the industry typically derives 20% of package volume from rural areas, the firm said.
Morgan Stanley has an overweight rating on Amazon shares, with a $2,100 price target that is nearly 20% above the stock's current level.
The firm also lowered its price target on both UPS shares to $78 from $85 — about 33% below its current price — and FedEx shares to $111 from $120 — which would be a drop of about 32% from current levels. Morgan Stanley has an underweight rating on UPS and an equal-weight rating on FedEx.
— CNBC's Michael Bloom contributed to this report.
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