STMP: The play you have been looking for

Posted about this stock the other day, didn’t receive much feedback so decided to do my own DD and shared it in wsb, I guess it also goes here pretty well.

What does this company do?

It provides mailing and shipping solutions and services to its customers, people who sell goods online. They mostly pay a monthly fee and use their services. They are integrated with virtually all online platforms. Amazon, Shopify, Ebay, Walmart etc you name it, everyone is integrated in their platform which makes them the most attractive medium for multi-channel sellers too.

1M customers reached already. Churn is low.

From annual report, “Stamps.com® is a leading provider of Internet-based mailing and shipping solutions in the United States (US) and Europe. Our portfolio of solutions is marketed under the brand names Stamps.com®, Endicia®, Metapack®, ShippingEasy®, ShipEngine®, ShipStation®, and ShipWorks®. Our software solutions allow customers to print mailing and shipping labels for multiple carriers around the world through downloadable software, web-based user interfaces (UIs) and application programming interfaces (APIs). Our solutions provide our customers with access to discounted carrier rates for select carriers, including the United States Postal Service (USPS) and United Parcel Service (UPS). Our solutions also offer customers improved operational efficiency and financial savings. Our customers primarily include small businesses, home offices, medium-size businesses, large enterprises, e-commerce merchants, large retailers and high volume shippers including warehouses, fulfillment houses and omni-channel retailers.”

Bullish reasoning:

I don’t know any technical mumbo-jumbo, but here’s the chart, earnings is in May or June

You must see all the images to understand my DD, I don’t know why reddit messed up my formatting

Earnings will be beaten handsomely by STMP, as COVID hasn’t really subsumed. Plus, the stock has a pretty big future considering the slow but sure shift to online sales.

Estimize estimates along with my estimates

Analyst price targets. George Sutton is a pretty reliable guy, I kinda follow him

Website traffic for Stamps.com, you tell me what you think from this!

Some mumbo jumbo that I don’t know anything about

Some ratios (it’s probably best if you check those fundamentals yourself)

Did I mention the $120M buyback?

Ownership data (SI is negligible)

Oh, and market cap is $3.72B.

Good CEO ratings. Bad diversity ratings.

Bear points:

  1. The moat is not necessarily the strongest, management has to continually deliver to keep on growing. I am fairly confident that they can do it. But you may not be.

  2. Too conservative management. You can easily see this from their non-existent debt and huge cash position.

  3. Too low volume. Float is also only 18M. Options bid-ask spread is wild.

Options OI and volume

  1. It’s kinda a deep value stock. There must be some reason which I am not seeing why it remains in this deep value territory. Private equity/activist fund sharks could target it, take it private and then DPO/IPO it at 10 times the valuation; but being almost 90% owned by various institutions, reduces this risk.

Mixed product reviews

For reference,

So, nothing can be definitively said about the stock seeing its product reviews because most of the time, only the frustrated customers would bother to review in TrustPilot

Common question: Why did the stock drop so much in 2019 and stuff?

Answer: They had an exclusivity deal with USPS where they got a lot of money for that deal. But management intentionally dropped it as USPS couldn’t make 2 day delivery or the fast delivery requirements that is necessary to compete.

The market reacted very badly for this short-term bump in the road. But COVID-19 has proved that management was right all along and it was absolutely necessary to drop that deal to grow the company.

Conclusion: I think the stock will pretty reliably beat the upcoming earning and the stock will jump heavily before the earnings only to dump a little or a lot after the earnings. Basically, buy the rumour, sell…
However, the stock is also a pretty decent one for long term holdings too.
Multiples are attractive keeping the growth in mind, and add to that the possibility of positive surprises from international expansion and probable acquisitions. If no acquisition occurs, the cash could get returned to shareholders through buybacks, which would be awesome too.

TL;DR: STMP will at least reach $270+ before earnings come out. My crystal ball says so. Plus, long term trend is sales moving online more and more, helping STMP in the process.

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Interesting, thank you for sharing.
It might be worth adding it to my “to be researched further” (interesting stocks) list :smiley: .

How do you know that the churn is low?

I stupidly invested in a company called Chip on Crowdcube, they say their churn is low, but that is total BS.

I’m now waiting on them winding up so I can claim my EIS loss relief.

That said everyone buys stamps so looks a good investment.

I have read the annual report.

Coll but yeah see that’s the thing. Audit requirements are different depending on the size of company, so how reliable is that number actually.

Based on their cash position (which is pretty impossible to fake), management’s long reputation, I would say 100% reliable.

down about 10% after earnings tonight and currently $174. Time to get a new crystal ball.

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STMP always seems to tank after earnings, as it did mid-February, but quickly shoots up again. Might be worth buying that dip some time next week. :relaxed:

It’s really helping my virtual portfolio :rofl: