Stamps.com Q4 '19 Earnings Preview
Stamps.com (STMP) reports Q4 ’19 results after the close on Wednesday, February 19. Against a backdrop in which the United States Postal Service (USPS) has already delivered strong results for the holiday season and posted another quarter of double-digit growth in PC Postage revenues, we expect a similarly strong performance from the company. We therefore remain confident in our Q4 projections, which skew towards the higher end of management’s guidance, and see results coming in ahead of Street expectations. That said, we remain in the dark on the impact of the new USPS reseller agreements now in effect and the anticipated ramp of Stamps.com’s strategic partnership with UPS. As such, management’s initial outlook for FY ’20 could deviate significantly from both consensus and our estimates. Although we believe our model is appropriately conservative for the year and remain bullish on the company’s longer-term prospects, we would await the print and guide before taking any further action.
Our Q4 estimates include revenues of $151.8 million, adjusted EBITDA of $36.6 million and non-GAAP EPS of $1.17, above consensus of $144.7 million, $33.6 million and $1.03, respectively, and near the high-end of management’s implied guidance. With the USPS’ monthly data reflecting a 10% Y/Y increase in PC Postage revenue during the December quarter, we expect results to meet, if not exceed, our estimates. Our view into FY ’20 is murkier though as we are unsure to what extent existing economics for resellers and Stamps.com were curtailed under the new agreements approved at the end of last year. We currently assume a decline of over 30% Y/Y in reseller-related revenue for FY ’20, partially offset by an initial placeholder of $20 million from the new partnership with UPS. More specifically, our FY ’20 projections include revenue, adjusted EBITDA and non-GAAP EPS of $517.5 million, $100.2 million and $3.01, respectively, below the Street’s $537.7 million, $110.0 million and $3.23. As we believe our estimates are reasonably conservative considering the unknowns, and we remain optimistic that Stamps.com could land other strategic partnerships over the course of the year, we continue to advocate holding onto existing positions despite the near-term uncertainty. Our price target remains $91.00, representing a FY ’20 EV/EBITDA multiple of 15x.
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).