Share prices of both FedEx Corp and the United Parcel Services (UPS) surged in premarket trading on Wednesday following reports revealing that Amazon would be halting its plans to put up a third-party shipping service in the US. The company that Amazon had initially planned to roll out, called Amazon Shipping, would directly compete with the services currently being provided by FedEx and UPS.
Following reports of the cancellation of Amazon's new shipping business, FedEx's shares rose by about 8.27 percent, while UPS's shares surged by 6.32 percent. Despite the rally, ratings by analysts for both companies remained unchanged.
Analysts had pointed out that the news was positive for FedEx, which no longer ships for Amazon. However, Amazon is still expected to do in-house deliveries eventually, which could spell trouble for both companies.
Both FedEx and UPS have lost substantial value over the past months. The decline in the companies' stock prices has been attributed to the ongoing global travel restrictions put in place to mitigate the spread of the coronavirus outbreak. Since the start of the year, FedEx's share prices have declined by more than 23.3 percent. UPS's shares have declined by 20.6 percent since the start of the year. Meanwhile, Amazon's stock prices continue to rally and has gained more than 8.9 percent year to date.
Amazon was already running a pilot program of the service in several cities around the country, picking up and delivering items for third-party companies that sold products on its website but did not store products at its warehouses. Amazon Shipping is also currently operating in the United Kingdom. Reports citing sources with knowledge of the matter stated that Amazon has no plans of halting its operations in the UK as of the moment.
Reports revealed that Amazon is halting the rollout of the service in the US following an internal review. The decision had also come as the company had experienced a surge in its e-commerce business following the imposition of stay-at-home orders and travel restrictions in several states across the nation.
Last month, Amazon announced that it planned to hire over 100,000 new employees to keep up with the rising demand. It had also warned customers that they may experience some delays in receiving their orders given the sudden surge.
Due to the rising number of confirmed coronavirus cases in the US, Amazon has to implement some changes to its platform, which included placing limitations on shipments of non-essential goods and prioritizing items such as medical products and food items.
