As a rule, it's better to buy stock in a company because you believe in its prospects on its own, not because you think a bigger fish is going to swim in and swallow it -- at a premium. Nevertheless, when rumors swirl about potential mergers and acquisitions, investors do take notice.
In this segment from MarketFoolery, a listener asks host Chris Hill and Motley Fool Asset Management's Bill Barker about one such rumor -- that Amazon (NASDAQ:AMZN) could be looking at a purchase of FedEx (NYSE:FDX). How realistic is such talk? The duo consider what Amazon has been up to lately on the logistics front, its overall strategy, and the way matters played out last time people started bandying about the idea that it was about to bid for one of its shipping partners.
A full transcript follows the video.
This video was recorded on March 4, 2019.
Chris Hill: Question from Zach Turno, who asks, "With Amazon bringing more of its logistics operations in-house, how realistic are the rumors that FedEx is a potential acquisition target for the all-powerful Amazon?"
I was unaware that there were rumors that FedEx was going to be acquired by anyone, much less Amazon. I think Amazon is probably more interested in just building their own stuff out, rather than buying a chunk of FedEx.
Bill Barker: Yeah. I think that with Amazon making more and more obvious moves into the logistics arena, it's not that I would call that realistic. Although, they're certainly not going to let me know ahead of time whether they're really interested. I think back to the rumors around XPO Logistics toward the end of 2017. There was a published rumor from a reasonably credible source that, at least the rumor was out there, that XPO was being targeted by Amazon in order to prevent Home Depot from acquiring XPO Logistics. This juiced the stock of XPO. Fast-forward a year later, and Amazon has just leveled XPO's stock by pulling two-thirds of its business from XPO right at and after the holiday season. It's not actually announced that that was Amazon, but XPO's No. 1 customer, which everybody believes could only be Amazon. That was a move away from using the logistics services of XPO.
Amazon is putting its packages in USPS, UPS, and FedEx. A huge chunk of its costs are using those services on the delivery side, so something ultimately is going to change or evolve. But I wouldn't bet money on shares of FedEx along the lines that Amazon's going to acquire it.
Check out the latest earnings call transcript for Amazon.