Federal Express Leadership in the Logistics Business - Essay Example

Will the Price change?
The recent performance of the firm indicates that it has been able to increase its revenue by 61% indicating a great increase in the revenue which is also manifested in the rise in stock prices. The current rise in the prices of the stock, therefore, indicates this rise in the profitability of the company. However, given the pace of economic growth and the fears of a double-dip recession in the US, the price increase may not be sustainable. Thus prices may decrease by some percentage, but they may not change by a great percentage due to fears of a double-dip recession.
The volatility of the Stock
The movement in stocks indicates that stock prices have relatively swung over the last five years. Though it remained in stable zones for some time, however, most of the time, it remained volatile given the fact that the overall performance of the firm was volatile also due to the financial crisis. However, its recent performance has seen the firm’s revenue skyrocket again and its prices also swung upward due to the higher performance of the firm.

However, given the strong fundamentals of the firm and its strong financial performance and industry dominance, the stock may not be entirely termed as risky. Theoretically, any firm with strong fundamentals and a unique industry position may not be termed as a risky business because of the stability in the earnings. It is, however, also important to note that FedEx may still be considered as going through its growth stage given the fact that means of logistics are continuously changing i.e. e-mails and social networking has now become a norm, and consumers prefer to use free methods of communication. However, in other segments of the business such as parcel delivery and logistics, FedEx still leads the way.
Alternative Investment Opportunities
Some of the alternative investments that may be available include investing in mutual funds, saving accounts, etc. The normal rates offered by the banks on savings account range from 4.5% to 3.5% depending upon the term of the deposits. However, this return may be good enough to force the investor not to go for equity futures as given the recent performance of the stock, the investor may lose money on the futures as the price of the futures may go down.
Expected Price
Current Price of Stock = $156.05
Future Price = Current Price x (1+r)^(T-t)
= 156.05 x (1+0.045)^1
= $163.07