Stamps.com Shares Took Licking but Now Sticking

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Three months ago, Stamps.com reported quarterly earnings that beat expectations, yet the company’s stock took a tumble as analysts worried the online stamp seller wasn’t gaining enough new customers.

This time around, the El Segundo company reported better customer growth Oct. 26 – and the stock went postal.

Stamps.com took in $27.2 million from customer subscription fees during the quarter ended Sept. 30, a 20 percent jump compared with the same quarter a year earlier. That helped boost net income to $7 million from $4.5 million.

The company also upwardly revised its yearly revenue projections to as high as $120 million. That sent the stock soaring more than 31 percent for the week, closing at $27.52 on Oct. 31 and making it the largest gainer on the LABJ Stock Index (see page 36).

While the majority of Stamps.com’s customers are small and home businesses that use the service to print stamps locally rather than going to the post office, the company also has been trying to acquire more big business clients. The high-volume shippers are charged bigger subscription fees and are more likely to purchase Stamps.com’s other services, such as insurance and labels.

Though the company doesn’t break down its customer list by business size, the quarterly report showed an increase in the average revenue per customer, which Stamps.com executives said is due to those big business clients.

“We’ve focused on developing specific solutions that targeted big businesses such as ecommerce merchants and other high-volume shippers in that segment of the market,” said Kyle Huebner, Stamps.com’s chief financial officer. “You’re really seeing that pay off in our increased revenue per customer.”

But one of those big clients, ecommerce powerhouse Amazon.com, is no longer part of that growth. Stamps.com had partnered with the online retailer to provide its stamp-selling service to third-party companies that sold products through Amazon’s site; Stamps.com took in a portion of the 7- cent fee on each stamp purchased. However, Amazon announced last month that it was working directly with the U.S. Postal Service for stamp selling on domestic shipments, essentially cutting Stamps.com out of the transaction.

But analysts don’t seem too worried.

“It would be more concerning if they had taken down revenue guidance after the Amazon.com change,” said Kevin Liu, an equity analyst with B. Riley & Co. in West Los Angeles. “But they’ve moved their guidance upward so they’re fully confident it won’t affect them too much.”

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