USPS PC Postage Revenue +58% Y/Y in November
Monthly data from the United States Postal Service (USPS) revealed that PC Postage revenue increased 58% Y/Y in November, accelerating from the 39% Y/Y increase in October. The growth in November brings the quarter-to-date increase to 48% Y/Y and suggests PC Postage revenue growth for Q4 ’20 will comfortably surpass our forecast for an increase in the low-30% range. By extension, this means Stamps.com (STMP) is poised for another quarter of outperformance versus our estimates, which already exceed both management’s implied Q4 guidance and current consensus expectations. In recent years, PC Postage data for December has also been published prior to Stamps.com’s Q4 earnings release, so we are leaving our estimates unchanged pending further data points for peak season. Our price target remains $358.00, reflecting a FY ’21 EV/EBITDA multiple of 25x.
Recall that last month’s PC Postage revenue results marked the first sequential decline in monthly sales we had ever observed between September and October. While we anticipated spending during the holiday season would ultimately yield the usual seasonal strength in Q4, we noted that management’s guidance was actually reasonable against the backdrop of slowing growth in October and a still uncertain economic outlook. With the November data in hand, however, we are now squarely in the camp that says guidance will prove overly conservative. In this regard, even another unprecedented sequential decline between November and December would not prevent Stamps.com from achieving our estimates. As for the upside scenario, we would still consider this year’s Q2 revenue performance as an appropriate cap at this juncture. While exceeding that high-water mark is certainly within reach, initiatives by retailers and carriers to pull spending forward this year may result in a less pronounced uptick than typically seen in December. Regardless, all signs point to a record peak season and another big beat for Stamps.com.
Our report with model and disclosures 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).