Shares of Stamps.com (NASDAQ:STMP) dropped 49.5% in February, according to data from S&P Global Market Intelligence, after the online postage and shipping solutions company revealed it is discontinuing its exclusive shipping partnership with the United States Postal Service (USPS).
To be sure, the stock plummeted more than 50% on Feb. 22, 2019, alone -- the first trading day after Stamps.com announced solid fourth-quarter 2018 results but disclosed its strategic USPS decision during management's subsequent conference call with analysts.
Stamp.com's actual quarterly results were impressive: Revenue climbed 29% year over year to $170.2 million, and adjusted earnings fell 20% to $3.73 per share but arrived well above the $2.90 per share most analysts were modeling. Paid customers also remained roughly flat from the same year-ago period at 736,000, but average revenue per paid customer increased 29% to $74.93, demonstrating the success of the company's strategic focus on acquiring fewer clients with higher lifetime values.
During the call, however, Stamps.com Chairman and CEO Ken McBride explained that, in the process of renewing its USPS deal, one of Stamps.com's nonnegotiable terms was to no longer be exclusive to the federally owned postal agency.
"USPS has not agreed to accept these terms or any other terms of our partnership proposal," he elaborated. "So at this point, we've decided to discontinue our shipping partnership with the USPS so that we can fully embrace partnerships with other carriers who we think will be well positioned to win in the shipping business in the next five years."
As such, Stamps.com told investors to expect full-year 2019 revenue of $540 million to $570 million, marking a year-over-year decline of 5.4% at the midpoint, with adjusted earnings per share in the range of $5.15 to $6.15. By comparison, most analysts on Wall Street were expecting the company to achieve fiscal 2019 earnings of $10.79 per share on top-line growth of 16%.
However difficult it must have been to bite this bullet, it's hard to blame Stamps.com management for taking what it viewed as the necessary steps to succeed over the long term. But given the severe negative impact it will have on the company's financial results, it's obvious our near-term-oriented market wasn't pleased.