- Amazon’s potential delivery service is not a significant threat to UPS.
- The real problem they face is a slowdown in the economy.
- The faltering economy along with lower oil prices and a stronger dollar are tanking UPS’ stock price.
When it comes to the United Parcel Service (NYSE:UPS), investors love talking about the threat of Amazon (NASDAQ:AMZN). There’s constant chatter that Amazon is creating a delivery network to crush UPS. And that’s why you should sell.
Yes, it’s true. You should sell UPS. But not because of Amazon. Amazon may be a long-term threat, but investors are blowing it out of proportion. The real reason you should sell is because of massive macroeconomic headwinds. These macro drivers trump any problems Amazon may cause.
UPS is in the business of making deliveries. They’re the busiest and most profitable when the economy is booming. But that’s not what’s currently happening in the US. Our economy is slowing.
The faltering economy along with lower oil prices and a stronger dollar are killing UPS.
But before we get into that, let’s first clear up the confusion about Amazon.
Amazon Is Not The Threat Here
As the story goes, the relationship between UPS and Amazon has been on the rocks lately. Costs became too much and forced UPS to raise their prices. Amazon was not pleased. You don’t raise prices on King Bezos. You only lower them. Bezos was famously quoted as saying:
Your margin is my opportunity.
With this kind of attitude, higher prices won’t work. Especially when Bezos’ entire business centers around undercutting everyone. (Keep reading….)