The market value of Stamps.com Inc. (STMP) more than halved after the online stamp vendor discontinued its partnership with the postal service. Investor sentiment was also dampened by the company’s dismal earnings guidance for fiscal 2019. The stock plunged about 57% in early trading Friday.
The company, a leading provider of Internet-based mailing and shipping solutions, in a statement announced the decision to end its long-term tie-up with the United States Postal Service due to disagreements over the partnership terms, especially the stipulation of exclusivity. The management said terminating the deal will help them focus more on business with other partners.
The announcement came during the post-earnings conference call that followed the fourth-quarter report. Customers use the software offered by Stamps.com for printing postage stamps, and those who are subscribed to the website can purchase stamps on discounted rates.
The management said terminating the deal will help them focus more on business with other partners
Addressing Wall Street analysts, Stamps.com CEO Ken McBride cautioned about Amazon’s (AMZN) foray into the shipping industry, which according to him could disrupt the operations of traditional players in the long run. He also hinted at working more closely with the e-commerce behemoth.
“Amazon’s track record of disrupting an industry is well established. So their threat should be taken very seriously by every player in the shipping industry. We are setting our corporate strategy assuming Amazon will be a big global player in shipping,” said McBride.
Also see: Stamps.com Q4 2018 Earnings Conference Call Transcript
Earlier, the company said it expects fiscal 2019 earnings to be between $5.15 per share and $6.15 per share, which is far below the analysts’ forecast. The revenue forecast – $540 million to $570 million – also fell short of expectations.
For the fourth quarter, Stamps.com reported an increase in earnings amid solid revenue growth. Earnings rose 7% to $2.30 per share, supported by a 29% surge in revenues to $170 million. Meanwhile, adjusted earnings dropped 20% annually to $3.73 per share.
Stamps.com shares ended Thursday’s trading at $198.08 and entered a downward spiral soon after the quarterly report. The stock traded below the $100-mark during in the pre-market session Friday. The selloff continued and the stock slipped to a 2-and-half-year low in the early hours of the regular session.