Amazon shares closed lower in the US Tuesday, amid news the US Postal System is proposing to raise the prices it charges Amazon for shipping, by between 9-12%. Analysts calculate those higher costs could raise the tech giant’s shipping bill by $1 billion in 2019.
Amazon shares ended the US Tuesday trading session 1.15% lower at $1,768.70. However, the stock is currently a little higher in out-of-hours activity.
Amazon seen hit by higher USPS charges
The USPS has proposed higher rates on shipping services used by Amazon. The parcel select service, used by the internet store, could be hit with a 9.3% hike in shipping charges for parcels weighing over one pound, while fees for lighter parcels, could increase by 12.3%.
The move follows criticism earlier in the year from US President Trump, that USPS was giving Amazon too good a deal. However, they said the planned shipping price hikes, were not a response to Trump’s comments.
“The price increases reflect the best judgment of the Postal Service Governors, who are seeking to establish new rates that will keep the Postal Service competitive, while also providing the Postal Service with much needed revenue,” an USPS spokesperson, told CNBC.
Shipping price hikes to cost Amazon
Credit Suisse analysts said that if the USPS price hikes are confirmed, it could cost Amazon more than $1 billion in 2019.
“As we roll forward the sensitivity analysis to 2019, we arrive at a potential incremental Shipping Expense range of $400 million to $1.1 billion range with the assumption that 40 percent to 50 percent of US packages are shipped via the Postal Service,” analyst Stephen Ju wrote in a note.
However, despite that potential hit from higher USPS shipping charges, Ju continues to be positive on the Amazon stock and raised his 12-month price target from $2,100 to $2,400. He also reiterated his outperform rating.