Should I buy FedEx stock now?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jun 21, 2021
  • FedEx shares on Monday surged nearly 3% after bouncing off the 100-day MA.
  • The rebound prevented FDX stock from entering oversold conditions.
  • The company will report fiscal Q4 earnings on Thursday, 24th June. So should I buy FDX shares now?

The US delivery services company FedEx Corp (NYSE:FDX) shares on Monday bounced off the 100-day moving average to surge above $293.00 per share. FedEx shares had fallen nearly 10% in the six weeks ending 18th June. The accelerated decline occurred after rival United Parcel Services Inc. (NYSE:UPS) cautioned investors over being overoptimistic about the post-covid recovery. 

There is doubt about the delivery services industry’s post-covid outlook. Companies benefited from vaccine deliveries, but as more people become fully vaccinated, revenue from this stream will decline.

FedEx looks exciting ahead of earnings

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The airline industry will benefit from the return of air travel. And as more people move around the world, demand for delivery services will also go up. Therefore, delivery service companies like FedEx will see a surge in revenues. 

Recent reports indicate that the US airline industry increased air travel in May, with people using air travel increasing by 19% from April. FedEx’s most recent quarter ended on 31st May. Therefore, its quarterly report will include the surge in travel witnessed last month.

Notably, the company will likely issue strong guidance for the next quarter and the fiscal year 2022. 

Analysts expect FedEx earnings per share to grow by 176% this year and at an average of 30% over the next five years. FDX shares trade at a trailing P/E ratio of 25.27 and a forward P/E of 14.07. Therefore, the stock could be substantially undervalued even after gaining more than 113% over the last 12 months.

Source – TradingView

Technical overview: FDX stock finds strong support off 100-day MA

Technically, FDX shares appear to have bounced off the support level at the 100-hour moving average. It also prevented the stock from entering oversold conditions in the 14-day RSI. As a result, FDX continued to trade within a consolidative wedge formation in the daily chart.

Investors looking to benefit from the rebound can target profits at approximately $306.43 and $320.23. The key support levels are $281.13 and $264.49.

Bottom line: FDX looks like an outstanding stock to buy in June

In summary, FedEx shares found support on Monday before bouncing back to trade above $293.00 per share. The stock retains a bullish outlook in an ascending pattern formation despite the recent pullback.

Looking forward, analysts expect strong earnings growth this year and over the next five years. Therefore, the company’s fiscal fourth-quarter results will be interesting to watch, with investors looking forward to the guidance for the fiscal year 2022.

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