Last week, we discussed the new way of life.
That is how ecommerce will expand even once the pandemic is over. And the logistics of shipping all those orders will be right behind.
Analysts are estimating that an estimated three billion packages will test the nation’s shipping infrastructure during this holiday season. That’s approximately 800 million more than last year.
Adding to the stress of the usual holiday demand is the demand for everyday household items as cases rise and some places institute stay at home orders once again. Amazon, UPS, FedEx, DHL and of course USPS are rushing to keep up with demand. But there’s no denying that delays will be inevitable this year.
Just last week, drivers at UPS got an internal message to stop picking up packages at some large retailers. This looks like an early sign that delivery networks are getting bogged down. But what’s really happening is that UPS is holding merchants accountable to volume agreements.
The company claims it is committed to working with large retail customers to ensure they know just how much capacity is available to them. And to making sure that the network capacity for small and medium sized businesses is available.
Some stores are already insisting that orders needed to be in by December 8th to guarantee delivery by Christmas. The reality is there’s not much that can be done in the next 17 days, but the shipping logistics problems are a long-term trend that need to be solved.
I’ve talked about the rise of parcel lockers before.
We’re familiar with them being in the lobbies of large apartment buildings. And Amazon has lockers spread out in major cities that can shave a day off delivery times in some cases. It would allow for the drivers to deliver more in less stops, but it puts some of the logistics onto the consumer.
Consumers are getting into the habit of things showing up conveniently right to their door with contactless delivery that this might be a hard sell.
Investors are already noticing that FedEx and UPS are in for a good fourth quarter.
Shares of UPS are up 41% since the beginning of the year.
And shares of FedEx are up 98% since the beginning of the year.
If you add FedEx or UPS to your portfolio are you going to see some gains? Most likely. Both companies will continue to be run up by investors until their next earnings announcement.
If they beat estimates, there’s a few more dollars for you…and if they don’t…well, you’ll still be able to lock in gains quickly before a slide.
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The reality is that these companies are trading at a P/E of 31.81 and 43.53, respectively. Large companies at valuations like that don’t usually have triple digit gains left in them.
For those kinds of gains we have to look to the emerging technology of this trend.
One company believes that the future of shipping is electric delivery vans, delivery drones and improved and integrated fleet metrics. And I think there’s a lot of validity to that. Now it’s just if this company is going to be the company for the job.
Workhorse Group Incorporated (NASDAQ: WKHS) was established in 2007 as a developmental-stage vehicle electrification company. But, unfortunately (or maybe fortunately for us) this 13-year-old company is still looked at as a startup.
The reality is that it occupies the niche electric vehicle space and has a customer list that includes DHL, FedEx, and UPS. On top of that the company is considered the frontrunner for a contract with the USPS since it was the only bidder that is offering an all-electric option for replacement trucks.
And investors seemed optimistic this year. Shares are up 582% from their $3.07 January pricing. But the company just isn’t going to be able to fulfill the units that were supposed to be completed in the fourth quarter this year.
Until recently, the company only had one primary battery supplier. Now, I don’t think I need to point out how important batteries are to this business. But all of a sudden, the company found itself not able to get the batteries needed. The CEO has assured investors that they have taken the down times to introduce several other battery companies into the supply chain.
The company currently have a backlog of 1,700 orders and the most recent 2021 production target is 1,800 vehicles. On top of that it has submitted its formal application to the FAA for type certification of its HorseFly Delivery Drone.
I think that 2021 is the make or break year for Workhorse. It will be the year that Workhorse finally starts showing the progress and sheds its startup appearance…or some other company does. Shares slide recently when the USPS announced that it was going to take longer to decide what firms will supply its replacement delivery trucks.
All that does it create a better buying opportunity if you’re looking to get in on the ground floor of the future of shipping trends.