Analyst Cuts Amazon Estimates Amid Potential USPS Rate Hike

With a potential increase in U.S. Postal Service fees on the horizon, Credit Suisse Analyst Stephen Ju is reducing his estimates for the near term on operating profit. His pro forma earnings per share estimate is now at $34.99, which is down approximately 19 percent, CNBC reported.

Ju wrote that, for a 2019 sensitivity analysis, the company arrives “at a potential incremental shipping expense range of $400 million to $1.1 billion, with the assumption that 40 percent to 50 percent of U.S. packages are shipped via the postal service.”

The analysis included consideration for increasing labor expenses, carrier costs and “moderating shipping volume.” It comes as the U.S. Postal Service filed a notice in mid-October seeking to have higher shipping rates take effect at the end of January with the Postal Regulatory Commission. In the event that the changes are approved, box and package rates could jump by 5 percent to 11 percent.

Recently, Amazon has set a record as the second U.S. company to surpass $1 trillion in market capitalization. Apple hit that milestone briefly a few weeks ago on the heels of a strong quarter, before shares fell back down under that threshold.

According to a report in CNBC, with shares rising close to 2 percent in early trading on Sept. 4, Amazon’s stock hit $2,050.50, surpassing $1 trillion in market cap. The stock needed to hit $2,050.27 to reach that milestone. What could be helping shares is a report from The New York Times that Amazon is increasing its efforts to lure advertisers its way, causing brands to increase their spending with the eCommerce retailer.

While Amazon makes most of its money on the eCommerce side of things, its other category — which consists of selling ads, such as banner and display ads — grew around 130 percent in the first three months of 2018, compared with the first quarter of last year. Google and Facebook, meanwhile, account for more than half of the $88 billion digital ad marketplace.