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United Parcel Service (UPS)  investors aren’t happy about Amazon (AMZN)  developing its own delivery service. In fact, they’re very worried about it. Sure another delivery company (no matter how small) is never good for business. But investors are blowing the Amazon threat out of proportion. There’s a strong bear case for UPS, but the main drivers revolve around macroeconomic headwinds. Amazon’s possible transition from customer to competitor is not a real factor. Why? Because Amazon only represents a very small part of UPS revenue.

 

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Recent tensions between UPS and Amazon have created a semi-hostile relationship. UPS couldn’t handle the costs incurred from delivering Amazon’s packages. In response, they jacked up their prices and Amazon threw a fit. Amazon relies on relentless cost cutting to stay afloat with their razor thin margins. Bezos’ intention is to ruthlessly undercut any and all competitors. In response to UPS’ price hikes, Bezos decided to start taking deliveries into his own hands.

 

Reference: https://www.thestreet.com/story/13433347/1/59-billion-reasons-amazon-is-not-a-threat-to-ups.html