Here's a simple recipe for a share price beatdown: Cut your earnings guidance not only for a single year, but for the next three, just to make it clear that whatever your turnaround plan is, you don't think it's going to show results anytime soon. That was what Stamps.com (NASDAQ:STMP) did on Thursday, and by the end of the day, a stock that had been trading at $200 just three months ago was down to $38.
In this segment from Motley Fool Money, host Chris Hill and senior analysts Ron Gross and Jason Moser dig into the strategic shift the company is making by taking a step back from the U.S. Postal Service, its long-term goals, and whether the pain will be short-term or not.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
This video was recorded on May 10, 2019.
Chris Hill: In late February, shares of Stamps.com were cut in half in a single day. That happened again this Thursday, when the company cut its earnings guidance for 2019 as well as 2020 and 2021. Ron, in less than three months, this stock has gone from $200 to $38.
Ron Gross: Brutal, and perhaps not getting any better anytime soon. They're claiming that the non-negotiable item for them was to no longer be the exclusive partner of the United States Postal Service, because they wanted ability to tap Amazon, FedEx, UPS. But that's just destroyed this business. Now, they're claiming that's a short-term pain, and once they can get into deals with those folks, they'll be able to offer multi different shipping arrangements to their customers, especially some of the smaller customers that use Stamps.com, and they'll be fine in the mid to longer term. That remains to be seen. The pain they're seeing now is due to the renegotiations with all these different customers. I think it's going to be painful for quite some time. I think perhaps they might never turn.
Hill: From a negotiating standpoint, shouldn't we be betting on all these other huge companies like FedEx and Amazon, now that Stamps.com is much smaller than it was three months ago?
Gross: It's a formidably competitive area.
Jason Moser: I think that's a reasonable bet. I mean, you know that Overstock.com commercial where they spend the first 30 seconds trying to explain to you why their name is overstock.com, even though they don't really sell overstock goods? I mean, I feel like Stamps.com is running into that brick wall as well. I don't know why the company is called Stamps.com at this point, because they're not really in the business of selling you stamps. They're trying to figure out where to take this business. It'll be a big branding problem going forward.