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.
Roth Capital Partners' Darren Aftahi maintains a Sell rating on Stamps.com's stock with a price target lowered from $78 to $35.
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.
Shares of Stamps.com were trading lower by more than 48 percent at $43.25 Thursday morning.
UPS Waives Shipping Fees, Offers Discounts To Woo More Small Business
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