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With recent developments in China, FedEx (NYSE:FDX) is now poised for massive growth over the next five years. FedEx stock had a major crash and recovery in the second half of last year. If you had been able to time that perfectly you might have made some significant money. But FedEx has been predominantly flat over the last couple years. All that is about to change.

FedEx and UPS (NYSE:UPS) were recently granted the ability to conduct business in China without regional partners. This is a huge step forward into a vast and growing market. FedEx forecasts that the delivery market in China will grow by 400% between 2012 and 2020, eventually exceeding $26 billion.

FedEx and UPS have been forced in the past to form partnerships with local Chinese companies to handle package shipments. That will no longer be the case. However, there is one major caveat to this decision. FedEx was only granted the right to ship independently in eight Chinese cities, though this list does include major cities such as Shanghai and Guangzhou.

Though China might be trying to box in FedEx and UPS and keep them from competing too much with the market leader China Postal Express, I still see this as a positive step forward and a chance for FedEx to expand its current $43 billion in revenues.

I believe this development moves FedEx into the category of a stock worth buying immediately before the market begins to reflect the profit and revenue growth brought on by investment in China.

Why Buy now?

First, FedEx already has a larger market share then UPS in China through various local partners in roughly 400 cities. UPS is just getting into the game in China and because of that was granted access to only five Chinese cities compared to FedEx's eight. This disparity will only provide further room for FedEx to distance itself from its American competitor.

Second, with the growing presence of online shopping, FedEx's estimates of the size of the delivery market may be far too low. Consider this, there are currently 193 million online shoppers in China and this number is growing rapidly. With such a large online retail market, there are currently 16 million packages shipped in China per day. To put this in perspective, FedEx's total global operations currently ship only about seven million packages per day. Reuters recently mentioned that Alibaba, China's largest online company, expects its sales to grow to almost $500 billion within the next seven years and has bragged that by the end of 2012 its online sales will be greater than eBay (NASDAQ:EBAY) and Amazon's (NASDAQ:AMZN) combined. Having secured a large chunk of this huge Chinese shipping market, FedEx can now grow and expand as the market around it continues to grow and expand.

Finally, FedEx had good fundamentals over the past year and these should only improve with new expansion into China. Revenues grew by 9% from 2011 to 2012 and net income grew by 40%. As noted in FedEx's 2012 annual report, the revenue growth was led by volume growth in foreign markets, most notably Asia. I expect Asia to continue to lead volume growth over the next five years.

Counterpoints

First, FedEx could have difficulty competing with the larger and more established China Postal Express. Second, the Chinese e-commerce sites might be more disposed to utilize a local Chinese company. In addition, UPS could find ways to grow rapidly and steal market share from FedEx. Finally, in the annual statement FedEx acknowledges that the debt crisis in Europe could hinder market growth not only in Europe but also in Asia.

Conclusion

There hasn't been a lot of reason to get excited about FedEx recently. It doesn't have a huge media following like Google or Apple and the stock has hardly moved all year. Be that as it may, FedEx is poised for massive growth. This is an investment for a patient investor happy to sit back and let the rising tide in China lift the stock for the next several years.

Source: Trying To Put FedEx In A Box