USPS PC Postage Revenue +52% Y/Y in August
PC Postage revenue increased 52% Y/Y in August according to monthly data available from the United States Postal Service (USPS). Although a deceleration from the nearly 64% rise in July, the continuing trend of robust growth in PC Postage revenue amid the COVID-19 pandemic brings the quarter-to-date increase to 58% Y/Y. In absolute dollars, PC Postage revenue in the first two months of the current quarter has already surpassed the total for all of Q3 ’19. Assuming normal seasonality in September, the performance thus far points to growth in excess of 50% for Q3 ‘20.
As it relates to Stamps.com (STMP), the latest PC Postage data suggests the company is poised to meaningfully outperform both consensus and our expectations for the quarter, which in turn should prompt another increase in management’s FY ’20 guidance. Our Q3 estimates currently call for revenue of $168.8 million, adjusted EBITDA of $46.7 million and non-GAAP EPS of $1.76, all of which exceed the consensus estimates of $163.5 million, $40.4 million and $1.61, respectively. Given that our projections are loosely based on a scenario in which PC Postage revenue increases 30% Y/Y in Q3, our confidence in Stamps.com’s ability to surpass Street expectations is quite high to say the least. At this juncture, we believe the company is on pace to beat our top line forecast by at least $10.0 million, and with much of that upside flowing through to adjusted EBITDA, we surmise this could translate into a $0.40 beat relative to our non-GAAP EPS estimate.
During the run-up in shares prior to and in the immediate aftermath of Stamps.com’s earnings release last quarter, we suggested that investors with outsized exposure take some profits while maintaining a core position in the company. Considering our near-term expectations for another substantial beat and raise, as well as the upside implied by our current price target, we continue to believe Stamps.com should be owned and view the current stock price as an attractive entry point for those looking to establish or add to a position. With e-commerce growth showing few signs of abating and key players like Amazon, FedEx and UPS planning to hire well over a quarter million seasonal employees in aggregate for this year’s peak season, we think our FY ’21 revenue and adjusted EBITDA estimates of $766.3 million and $251.5 million, respectively, may very well be achieved this year. That said, our estimates already sit above consensus and skew towards the high-end of management’s guidance, and our unchanged price target of $346.00, which represents a FY ’21 EV/EBITDA multiple of 25x, also implies significant upside. We are therefore content with leaving the bar unchanged for the time being and will await a date closer to the company’s next earnings release to opine on where exactly management’s guidance may be headed.
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).