Jim Cramer thinks FedEx stock can go even higher after the delivery giant separates its freight business. "This thing is going to be worth dramatically more after the spin-off," Jim said Tuesday on CNBC. "You're going to say, 'Why isn't this stock at $500?'" That level implies roughly 25% upside from current levels. FedEx, our newest Club stock, has already climbed 38% year to date as investors grow more optimistic about the company's transformation under CEO Raj Subramaniam. A key part of our bullish thesis centers on FedEx's planned separation of its freight division on June 1. We're not alone. Wells Fargo described the FedEx Freight split as a compelling "self-help" story in an improving trucking market. The analysts cited pricing power and lower costs. Last week, Citi brought up cost savings, as well as improved profitability, while saying it continues to be "cognizant of Amazon risk." Jim dismissed concerns that FedEx faces a growing competitive threat from Amazon Supply Chain Services. Earlier this month on "Mad Money," Subramaniam downplayed Amazon's latest logistics push, calling it more of a third-party offering. While also participating in that business, Subramaniam said it represents only a small portion of the company's overall revenue. FedEx's third-party logistics segment "is about a $2 billion business," Subramaniam told Jim. "It's not the biggest piece of our business." FedEx is projected to generate over $93 billion in its fiscal year ending in May, according to FactSet. Beyond traditional shipping, Jim said FedEx offers exposure to long-term growth trends tied to artificial intelligence infrastructure. The company transports semiconductors, servers, and other sensitive equipment used in data centers. FedEx has pegged that service at roughly a $7 billion addressable transportation opportunity. "This is the way to play not just e-commerce, but also the data center," Jim said. While acknowledging FedEx is no longer a bargain after its strong rally, he argued the stock still deserves a higher valuation multiple than where it currently trades. "You're not getting a steal at 20 times earnings," Jim said. "But I think at least it deserves like a 23 to 24 times multiple." Jim plans to discuss FedEx in greater detail during Wednesday's CNBC Investing Club Monthly Meeting alongside Jeff Marks, director of portfolio analysis for the Club. (Jim Cramer's Charitable Trust is long FedEx. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
