Stamps.com Q2 '19 Earnings Preview
Stamps.com (STMP) reports Q2 ’19 results on Wednesday, August 7. Our revenue, adjusted EBITDA, and non-GAAP EPS estimates sit above consensus, and we remain comfortable with our projections. As such, we anticipate another quarter in which headline results compare favorably with Street expectations. With the outcome of the United States Postal Service’s (USPS) negotiations with its reseller partners still unknown, however, we doubt this translates into any added upside to full year guidance. We expect insight into the near- and long-term economics of the reseller program to be top of mind during the earnings call as well as any updates on Stamps.com’s progress towards replacing its lost USPS revenues with one or more new partnerships. Considering competition for e-commerce and last-mile deliveries continues to heat up, we remain optimistic in the company’s prospects for securing new strategic relationships. That said, we acknowledge that the lost incentive payments and reseller revenue shares will weigh on results in 2H ’19 and FY ‘20, so shares are most appropriate for value investors with a long-term horizon. Our price target remains $56.50, representing a FY ’20 EV/EBITDA multiple of 10x.
Our estimates for Q2 include total revenues of $138.2 million, adjusted EBITDA of $36.9 million, and non-GAAP EPS of $1.15. Consensus estimates reflect more conservatism, calling for $130.0 million in revenues, $33.0 million in adjusted EBITDA, and $1.00 in non-GAAP EPS. PC Postage revenue data through the first two months of the quarter reveals a 12% Y/Y increase, leaving us comfortable with our call for a beat. However, we do not anticipate a corresponding raise to management’s FY ’19 guidance, which was lowered last quarter to $510.0-$560.0 million in revenues, $110.0-$150.0 million in adjusted EBITDA, and $3.35-$4.85 in non-GAAP EPS. The decline in the British Pound over the past quarter also limits upside to an extent.
Looking at the bigger picture, competitive dynamics continue to shift across the shipping and logistics landscape. UPS has now followed FedEx’s lead in announcing plans for seven-day pick-up and delivery beginning in 2020. According to a Supply Chain Dive article, “Amazon logistics service lacking for small parcel shippers, proposal reveals,” rates for Amazon’s shipping service fall between the USPS’ rates and those offered by FedEx and UPS, but with a more limited network and service options. We believe Stamps.com’s expertise in shipping and established customer base could prove valuable in driving volumes to these carriers and thus see value in the stock.
Our model is available here.
Disclosure(s):
The analyst, a member of the analyst’s household, and/or an account in which the analyst exercises discretion hold(s) a long position in the common stock of Stamps.com (STMP).