FedEx Corp. (FDX, Financial) has been in an unnecessary downward spiral during 2021 as the supply chain bottlenecks have caused systemic pressure. I believe the stock is an excellent opportunity at its current price.
Technicals
This may be unorthodox, but I'm starting this analysis with technical levels as I'd like to explain this year's price action and the recent change in direction.
After trading at a relative strength index below 30 (oversold territory) a mere two weeks ago, the stock's 14-day RSI has rebounded to over the 53 handle due to investor optimism.
In addition, the stock is trading above its 10-day moving average, which indicates short-term momentum is present.
Value drivers
A few value drivers can sustain FedEx's momentum as we learn how to live with the virus instead of calling for abrupt lockdowns.
First off, the U.S. is increasing its capacity of major ports by 22% on the West Coast and 14.4% on the East. The U.S. imports from Asia have already increased by 32.4% over the past year and by 19.4% from pre-pandemic 2019 levels. FedEx will surely benefit as a consequence.
In the longer term, the infrastructure bill aims to spend $17 billion on port upgrades, which could amplify the stock in expectation of increased longer-term revenue.
Finally, FedEx is a mature company with low historical volatility. Investors may see this sell-off as an overreaction and buy into a perceived dip.
Valuation
FedEx is currently trading at 13.19% below its five-year average with a PEG ratio of 0.07, which means the company's growth is outpacing the share price.
Furthermore, price multiples of 0.72 times sales and 6.54 times cash flow is well below their value thresholds. These multiples are trading below their respective five-year averages by 13.09% and 35.28%.
Wall Street also remains positive on the stock. Last week, Robert W. Baird placed a buy rating on the stock and believes it will reach the $300 level, which could present 26% in upside.
Final word
FedEx is a rare dip-buying opportunity that the market has only started to spot now. Both technical and fundamental valuation metrics align for further upside. The infrastructure bill and short-term port capacity increases will act as a support base for long-term upside.
