A leading analyst has downgraded United Parcel Service (UPS) stock after the parcel giant revealed plans to slash the number of Amazon (AMZN) packages sent through its service.
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Earlier this week UPS said it would be reducing Amazon volumes by over 50% by the second half of 2026. It is part of a UPS strategy to move away from large, low margin-contracts. However, Amazon — which insisted that the decision had solely been driven by UPS – will continue to partner with it going forward.
Amazon Volumes Call Brings Risk to UPS
Colin Sebastian, analyst at Baird, downgraded UPS on the news to Neutral from Outperform with a price target of $130, down from $160. He said its Amazon cutback “introduces a multi-year challenge and higher probability the relationship ultimately unwinds altogether.”
He added that UPS’s strategy of focusing on profitability and restructuring over volume growth is a “sound long-term strategy” and could yield benefits, but that it would have to “run even harder” to offset the impact of reduced Amazon volumes.
This decrease, he said, represents a significant risk because Amazon has been a major revenue contributor, accounting for a substantial portion of UPS’s domestic revenue. Indeed, he believes that the UPS stock will be “range bound” until its strategic and financial outlook settles down.
UBS also lamented a “step-up in uncertainty” as it reduced the UPS price target from $170 to $141. Wells Fargo’s Christian Wetherbee, lowered the price target to $128 from $150 but kept his Overweight rating. He said that strategically “derisking Amazon is the right move.”
UPS Stock Weathers the Blow
UPS stock was marginally higher in pre-market trading. It was down however by 14.11% at the close on Thursday. In the last 12 months the stock has dropped by just over 15%.
Is UPS a Good Stock to Buy Now?
On TipRanks, UPS has a Moderate Buy consensus based on 10 Buy, 2 Hold and 2 Sell ratings. Its highest price target is $179. UPS stock’s consensus price target is $146.08 implying an 27.14% upside.
