Stamps.com Craters After 2019 Profit Outlook Is Slashed

(Bloomberg) -- Stamps.com Inc. plunged 48% in pre-market trading Thursday, poised to drop to a five-year low, after the company slashed its profit outlook for the full year, fueling investor concerns about its ability to protect margins in the absence of a key partnership with the U.S. Postal Service.

The company, which makes software that lets customers print postage for U.S. mail, had set its earnings forecast for the year in February, when it reported fourth-quarter results and also said it had ended the USPS partnership. While it expected the discontinuation to result in some “short term pain,” the latest outlook suggested that pain may be more severe than anticipated.

Stamps said the lowered guidance mainly reflected potential unfavorable short- and long term amendments, re-negotiations and termination of certain contracts between the USPS and the company’s partners who are part of the USPS’s reseller program. The company said it expected a profit of $3.35 to $4.85 a share for the full year, down from its prior view of $5.15 to $6.15 per share.

The worsening outlook drew at least one downgrade from analysts, as B. Riley cut the stock to neutral from buy and slashed the price target by 65% to $45. Roth Capital's Darren Aftahi, who has the only sell rating on Stamps, cut his price target to $35 from $78.

``The super high-margin business that made the USPS-relationship (exclusivity/ commission and reseller program) so attractive for STMP investors, has pivoted so quickly, that the uncertainty of cash flow over the next 2-3 years is extremely unclear,'' Aftahi wrote.

Shares of the company, which sank nearly 60% after the February announcement, had already lost 46% so far this year through Wednesday.

©2019 Bloomberg L.P.