Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money

73% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

FREE EBOOK

How to Day Trade Stocks & Indices

  • Place your first trade
  • Identify 9 chart patterns
  • Pro strategies step-by-step

You'll also receive our newsletter and other Opto emails in accordance with our privacy policy. This form is protected by reCaptcha

Don't miss out

Get our FREE Day Trading guide

+ Pro-trader interviews

You'll also receive our newsletter and other Opto emails in accordance with our privacy policy. This form is protected by reCaptcha

FREE Trading guide

Including Day trading strategy examples

+ Pro-trader interviews

You'll also receive our newsletter and other Opto emails in accordance with our privacy policy. This form is protected by reCaptcha

  • Updates

Is UPS’s share price wrapped up for Christmas?

Is UPS’s share price wrapped up for Christmas?

United Parcel Service’s [UPS] share price has delivered this year, driven by the boom in online shopping during the coronavirus pandemic. However, after surging to $175.47 on 12 October, UPS’s share price tumbled 11.6% to $154.84 on 28 October, the day the company released its third-quarter earnings. As of 14 December’s close, UPS’s share price is up 42.67% for the year at $166.62.

UPS’s share price started 2020 at $113.29, before slipping to a low of $84.22 on 12 March as coronavirus fears hit markets. UPS’s share price rose to $97.52 on 26 March, but dropped again to $87.97 on 3 April as global lockdowns dampened business demand and hit freight volumes on passenger aircraft.

 

 

However, as lockdowns eased, UPS’s share price began to recover, hitting $118.14 on 28 July. It accelerated to $139.71 on 30 July after it revealed that consumer e-commerce demand and COVID-19-related healthcare shipments had seen second-quarter revenues jump 13.4% to $20.5bn. Its average daily volume zoomed up by 22.8%, reaching 21.1 million packages a day.

 

A weakened fourth quarter

UPS’s share price drop in late October was blamed on comments from Brian Newman, CFO at UPS, who said that lower profit margins and employee benefit costs would lead to a weaker fourth quarter. However, UPS’s share price kept motoring, dropping to $172.69 on 24 November and $168.40 on 11 December.

This fall was despite UPS reporting a 15.9% increase in Q3 revenues to $21.2bn, due to high e-commerce traffic and strong outbound demand from Asia. It also noted growth from small and medium-sized businesses, helped by its Digital Access Program, which offers online vendors, merchants and payment providers attractive rates.

$21.2billion

UPS' Q3 revenue - a 15.9% rise

  

Much of the recent (albeit choppy) momentum has come from investors’ expectations of a bumper e-commerce Christmas holiday season as shoppers remain in lockdown or keen to avoid crowded malls. According to research by PYMNTS.com, 74.1% of holiday shoppers in the US are buying online this year, up 12.7% from 2019.

UPS has had its fair share of festive cheer before. For its fourth quarter in 2019, it reported an 8.8% hike in earnings per share to $2.11, helped by strong average daily volume growth in the peak holiday season. In the same period in 2018, it announced record shipments. For those familiar with receiving oversized multicoloured jumpers or three identical tin openers, UPS also recorded 1.9 million parcel returns on National Returns Day in the US on 2 January in 2020.

“This year, we’ve seen a massive acceleration towards the online world. The pandemic turned what would have occurred over several years into a near-overnight evolution,” said Lenore Hawkins, strategist with Tematica Research, a partner on the Digital Infrastructure and Connectivity UCITS ETF [DIGI.L].

Indeed, demand has been so high that UPS told its drivers not to pick up packages from six retailers including Gap during the recent Cyber Monday online shopping event, reported The Wall Street Journal.

Regarding these temporary limits, Glenn Zaccara, director of media relations at UPS, told CNBC: “If the demand exceeds the planned allocations, UPS will work with our larger customers to ensure the volume gets picked up and delivered as more capacity becomes available in our network.”

This raises concerns over further delivery crunches and costs for UPS in the weeks ahead, but it also reveals that bumper online holiday sales forecasts are already well on track.

“If the demand exceeds the planned allocations, UPS will work with our larger customers to ensure the volume gets picked up and delivered as more capacity becomes available in our network” - Glenn Zaccara, director of media relations at UPS

 

Improving quality

Daniel Foelber, writing in The Motley Fool, believes UPS has a bit of everything. “It has growth prospects… and an impressive dividend that should continue to increase,” he says. “Pessimistic fourth-quarter guidance and a strong holiday season offer plenty of short-term upside, but long-term investors will be even more interested in the company's e-commerce investments, international strength, and ability to generate tons of cash.”

Among 27 analysts polled on Market Screener, UPS has a consensus Outperform rating and an average target price of $171.68. This would represent a 3% upside on 14 December’s closing price.

“Pessimistic fourth-quarter guidance and a strong holiday season offer plenty of short-term upside, but long-term investors will be even more interested in the company's e-commerce investments, international strength, and ability to generate tons of cash” - Daniel Foelber

 

Credit Suisse has an Outperform rating because it believes revenue quality is improving, with strong growth in small and midsize businesses, and that the opportunity for it to improve profitability may be larger than previously anticipated.

Zacks Equity Research has a Buy rating on the stock, citing the potential of its Healthcare unit for distributing new COVID-19 vaccines worldwide. In its Q3 announcement, UPS said that it was expanding its “freezer farm capacity” which will help to store the vaccines.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

Continue reading for FREE

  • Includes free newsletter updates, unsubscribe anytime. Privacy policy

Free ebook

Tricks of the trade: 7 interviews with the world’s top traders

Get it now

Related articles