Wall Street waited far too long before abandoning FedEx. Why Is It Too Soon to Buy the Stock?

As FedEx stock falls, Wall Street is reacting. Contrarian investors may wish to buy shares on the cheap, but it appears to be too early.

Downgrades abound after FedEx FDX -0.07% (ticker: FDX) stunned investors by posting lower-than-expected results for its fiscal first quarter, which ended in August, and withdrawing financial guidance for the year.

The latest downgrades came too late to spare investors any grief today. Shares might go lower from here, but the stock is down more than 20% in premarket trade Friday.

It all began on Thursday evening. FedEx reported earnings of around $3.44 per share on $23.2 billion in revenues. Wall Street expected profits per share of more over $5 on $23.5 billion in revenues. Volumes were slowing, according to management, as "macroeconomic indicators drastically worsened." Costs were also an issue.

So far, five analysts have downgraded the stock in reaction. BofA Securities downgraded the stock to Neutral from Buy, while J.P. Morgan analyst Brian Ossenbeck reduced his recommendation to Hold from Buy and his price objective to $214 from $258 per share. Loop Capital Markets analyst Rick Paterson downgraded the stock to Hold from Buy and reduced his price objective to $202 from $339 per share.

Todd Fowler of KeyBanc reduced his recommendation from Buy to Hold. He put his price goal on hold. Fowler's target price before to the reduction was $325 per share. Finally, Stifel analyst J. Bruce Chan cut shares to Hold from Buy, joining the others. His price objective has dropped from $288 to $195 per share.

The Street also reduced its price targets. The average analyst price estimate is currently about $250 per share, down from over $290 only a few days ago.

This month, FedEx stock has been downgraded six times. Only Citi's Christian Wetherbee cut shares to Hold from Buy before to the disastrous forecast. Nonetheless, 55% of analysts tracking the stock recommend the shares as Buy. And the average price objective is over 50% higher than where the stock is expected to open. Perhaps this is a good moment to buy stock on the cheap. After all, the stock is currently priced at around 9 times the most recent fiscal year 2023 profit expectations.

In this scenario, discretion may be the better part of valor. For instance, profit projections are likely to fall more, making it difficult to declare the stock inexpensive just yet. That 9 times multiple is most likely not 9 times.

FedEx had experienced a streak of poor outcomes in late 2018. FedEx decreased its full-year outlook to around $16 per share from around $17.50 when it reported fiscal 2019 earnings in December 2018.

In response, shares fell more than 12%. It took the corporation a couple more quarters to iron out the bugs. Over the next year, shares fell another 10%, while the S&P 500SPX -1.19% gained around 28%.

However, during the next year, from late 2019 to 2020, FedEx shares surged over 90% while the S&P increased 15%.

Trying to timing the market is difficult and typically a terrible idea. FedEx stock did become a great performance in 2019 and early 2020. And stocks are now closer to a bottom than they were previously. Nonetheless, prior experience suggests that investors should take a few months to assess the situation.

Patience may be a virtue at times.