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Online postage and shipping software company Stamps.com Inc. (NASDAQ:STMP) reported first-quarter results that came in better than expected, but issued a big guidance cut. Along with management's commentary, the cut reinforces the bearish case for the stock.
The Analyst
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Roth Capital Partners' Darren Aftahi maintains a Sell rating on Stamps.com's stock with a price target lowered from $78 to $35.
The Thesis
Stamps high-margin business has now "pivoted so quickly," Aftahi said in a research report. The company's exclusive relationship with the U.S. Postal Service gave the company a venue to push its platform and gain a commission, but came to an end in late 2018.
In Stamps first-quarter report, the company acknowledged the USPS is renegotiating the negotiated service agreements of several of its reseller partners to make changes to postage spreads. The analyst said this should be viewed as "bad news" for Stamps as it implies a "pure margin" revenue steam will now be compressed. It's possible these spreads can compress even more over the coming years, which implies a "very unclear" EBITDA outlook.
The company's new era of uncertainty makes it "almost impossible" to properly value Stamps stock and investors assuming they are buying value at current levels should "look for other opportunities," the analyst wrote.
Price Action
Shares of Stamps.com were trading lower by more than 48 percent at $43.25 Thursday morning.
Related Links:
Spurned By USPS Denial To End Exclusivity Agreement, Stamps.com Takes Its Ball And Goes Elsewhere
UPS Waives Shipping Fees, Offers Discounts To Woo More Small Business
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.