FedEx future may lie on a rocket ship
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FedEx future may lie on a rocket ship

According to Morgan Stanley, Elon Musk’s commercial rocket ambitions could change the face of delivery services like FedEx in the not-too-distant future. There’s a precedent for this: in the 20th century, airplanes and Panamax cargo ships evolved the parcel industry – is it time for the next big innovation to redefine it in the 21st century? If so, the potential is huge.

FedEx’s share price has appreciated by 20% year to date

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SOURCE: Yahoo Finance

In a note on Thursday, a team of Morgan Stanley analysts wrote: “The freight transportation business – especially parcel delivery – is on the cusp of transformation from multiple new transportation modalities. Elon Musk recently announced a new impact that could have the biggest impact of all – rockets.”

The booster system BFR is a 42-engine rocket with a payload capacity of 150 tons and a 100-person capacity (SpaceX employees have a colloquial interpretation of this acronym in which the first word is “Big” – I’ll leave the rest to readers’ imaginations).

Musk wants to use the BFR to land two cargo ships on Mars in the next five years – a precursor to human travellers just two years later – but he has said he’s open to using the same tech to speed up transportation on Earth., saying “if you build a ship that’s capable of going to Mars, what if you take that same ship and use it to go form place to place on Earth?”

Morgan Stanley notes that the parcel delivery service is characterized by steady – but slow – growth of around 2% to 3% annually. It’s the most obvious application of the tech Musk is suggesting and, according to the analysts, the “industry could see a fundamental reset with the introduction of rockets as a transportation modality.”

Given Musk’s recently released video of a rocket transporting people from New York to Shanghai in 30 minutes, that may well be an understatement.

Disclosure

Dominion holds FedEx in its Global Trends Ecommerce Fund.


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