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UPS upgraded by Deutsche Bank, sees 15% stock return in next year

  • Analyst Amit Mehrotra upgrades shares of UPS to buy, saying the secular shift toward e-commence makes the current stock valuation cheap.
  • The analyst also raises his 12-month price target on the worldwide shipping company to $135 from $125, representing 15 percent total return including dividends.
  • Shares jumped than 3 percent Monday.
A United Parcel Service driver moves a package out for delivery in New York.
John Taggart | Bloomberg | Getty Images
A United Parcel Service driver moves a package out for delivery in New York.

Investors should buy shares of United Parcel Service as more people turn toward e-commerce for consumer products and general retail, according to Deutsche Bank.

Given the ongoing trend to online shopping, UPS stock is a buying opportunity for those on Wall Street looking for a cheaper option, according to analyst Amit Mehrotra, who upgraded shares to buy from hold.

"Our upgrade of UPS to buy reflects secular, e-commerce growth opportunities and current valuation that we believe overly discounts a heightened investment cycle," wrote Mehrotra. "Ultimately we see two turns of additional multiple expansion opportunity for UPS on 2019 earnings, which together with 3 percent dividend yield implies double-digit return potential."

Shares jumped 3 percent Monday.

The analyst also raised his 12-month price target on the worldwide shipping company to $135 from $125, representing 15 percent total return including dividends. UPS has underperformed the market this year, up 5 percent versus the S&P 500's 18 percent since January.

Goldman Sachs initiated coverage on UPS last month with a buy rating, citing a strong international outlook and overblown worries about Amazon's foray into air freight and logistics.