Amazon (AMZN) Reaches USPS Deal after Threatening to Slash Deliveries

E-commerce giant Amazon AMZN +1.43% ▲ has reached a new agreement with the U.S. Postal Service on package deliveries, according to Reuters. Under this deal, the two companies will continue working closely together, which is important given how large their relationship already is. Sources familiar with the situation said that Amazon will keep about 80% of its current deliveries with USPS, which equals more than one billion packages per year. As a result, the agreement helps preserve a major part of Amazon’s delivery network.

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This deal matters even more when you consider what was at risk. Previously, Amazon had been exploring the idea of replacing USPS with its own nationwide delivery system. That would have been a serious problem for the Postal Service, which has an $80 billion budget and depends heavily on Amazon. In fact, Amazon brings in around $6 billion in annual revenue for USPS, thereby making it its largest customer. Therefore, losing a large portion of that business could have significantly impacted the agency’s finances.

It is worth noting that before this agreement, Amazon had criticized USPS for planning to auction access to its last-mile delivery network, which led the company to threaten cutting its delivery volume by at least two-thirds. However, this new deal shows that both sides were able to find common ground. Amazon said that it is pleased with the agreement and expects the partnership to continue supporting customers and communities going forward.

Is Amazon a Buy, Sell, or Hold?

Turning to Wall Street, analysts have a Strong Buy consensus rating on AMZN stock based on 43 Buys and three Holds assigned in the past three months, as indicated by the graphic below. Furthermore, the average AMZN price target of $284.33 per share implies 34% upside potential.

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