Investing.com - Shares of FedEx and UPS plunged Tuesday, dragging industrials lower, after Morgan Stanley raised concerns that Amazon Air could eat into the revenues of both delivery service companies.
"We think the market is missing the risk Amazon (NASDAQ:AMZN) Air (its in-house Express Air network) poses to UPS/FDX growth," Morgan Stanley warned.
The bank estimates Amazon Air represents 2% of potential revenue lost for UPS and FedEx this year.
Revenue losses will likely accelerate once Amazon Air has "all 40 planes in the air (and potentially 100 planes if it runs its planned air hub at capacity) and as its utilization improves to UPS/FedEx levels," the bank added.
Morgan Stanley cut its price target on FedEx (NYSE:FDX) to $230 from $240 previously, sending the delivery services company's shares tumbling 7%. UPS (NYSE:UPS) also tumbled 7% as its share price was lowered to $87 a share from $92 a share.
UPS and FedEx, both of which have exposure to China, albeit modest, were also weighed downed by concerns that the U.S.-China trade truce will yield little meaningful progress after Trump threatened to restart the trade war if China talks fail, referring to himself as a "Tariff Man."
S&P 500 Industrials fell 3.5%.