Stamps.com: A Broken Stock And A Broken Business

The share price of Stamps.com (STMP) dropped like a rock after its announcement of ending its exclusive shipping partnership with USPS, United States Postal Service, in order to pursue other private carriers. Stamps.com CEO Ken McBride claimed that the shifting market environment of the shipping and logistics industry was the main driver for the decision to break away from USPS, which in McBride’s prediction, would become less and less competitive in facing powerful new entrants like Amazon (AMZN). In doing so, Stamps.com guided its revenue down by 5% and halved its earnings guidance in 2019.

The immediate negative reaction from the market is understandable. However, could such a drastic strategic shift be justifiable for the sake of its long term prospect? Could this be a great buy-the-dip opportunity for a value-oriented investor because it might be a simple case of market overreaction to a short term event? After all, Stamps.com has been an impressive growth company for the last few years. Unfortunately, this may not be a case of a quick rebound. Instead, it is likely a slow spiral down toward a smaller existence, if not irrelevance.

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