Investors should hold off on FedEx until it gets past some growing pains, according to Wells Fargo. Analyst Allison Poliniak-Cusic downgraded shares of FedEx to equal weight from overweight in anticipation of lower revenue growth ahead. “While FDX has (rightly, in our view) pivoted away from growth and toward efficiency, we don’t believe the revenue implications are fully captured in consensus,” Poliniak-Cusic wrote in a Monday note. “FDX’s new savings outlook calls for a greater portion of targeted profits to come from cost savings, which implies less from growth, and by extension, lower revenue growth.” The analyst cut her price target to $160, down from $199, representing just roughly 4.4% upside from Friday’s close at $153.23. Shares of FedEx slid 1.8% in Monday premarket trading. Shares of FedEx are already down 40.8% this year, but the analyst said the stock could face greater pressure ahead as it enters a “new phase of lower growth” as global cargo slows. According to the note, FedEx could grow revenue at a 2% compounded annual growth rate, compared to a historical CAGR of 6% . “There is a significant operational redesign underway at FDX. Ultimately, FDX should likely emerge as a less asset intensive and more efficient service provider. However, that evolution will take time, measured in years not quarters,” Poliniak-Cusic wrote. “When FDX updated its long-term guidance with F1Q23 earnings, the company acknowledged the headwinds in targets and ranges. Yet, estimates have not caught up. Thus, we believe there is additional pressure ahead,” Poliniak-Cusic added. —CNBC’s Michael Bloom contributed to this report.
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