Amazon.com, Inc. investors are always on the lookout for the company’s next disruptive business, and some believe it could be parcel delivery. Amazon Flex is not a major threat to United Parcel Service, Inc. and FedEx Corporation, according to Bernstein analyst David Vernon.
Amazon Flex is Amazon’s crowdsourced delivery model that could potentially challenge FedEx and UPS, but Vernon said Flex has major limitations.
“We see limited risk of full-scale diversion of volume from traditional carriers to crowdsourced models due to the constraints required to build efficient flex blocks and limitations on supply of ‘right-timed’ labor,” the analyst said in a Thursday note.
The pay rate for Amazon Flex drivers is not high enough to stimulate full-time job growth, Vernon said. Amazon Flex drivers earn about $11 per hour on average, but take home only about $5 per hour after costs are factored in, he said.
Crowdsourced delivery services are most effective during peak holiday delivery season and can actually serve to alleviate some of the holiday pressure on FedEx and UPS, according to Bernstein.
After exploring the impact Amazon Flex is having on the delivery business, Vernon concluded that FedEx and UPS are both undervalued at the moment based on excessive fear of Amazon.
“We do not see the growth of crowdsourced delivery models as destabilizing to the capacity and pricing picture for residential small package delivery,” he said.
Bernstein has Outperform ratings for FedEx and UPS and price targets of $296 and $137, respectively.