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Why Stamps.com’s Stock Jumped 25% in May

By Demitri Kalogeropoulos – Updated Jun 5, 2020 at 9:51AM

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Consumer demand changes from the COVID-19 pandemic are giving a boost to management's rebound plan.

What happened

The stock of Stamps.com (STMP) outperformed a surging stock market last month. Shares jumped 25% in May compared with a 4.5% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

The rally added to significant gains for investors: The stock has more than doubled so far in 2020 while the broader market is down slightly.

A delivery man drops off several boxes at a front door.

Image source: Getty Images.

So what

In an early May earnings report, the postage specialist revealed plenty of good news for investors. First-quarter sales jumped 11% and earnings rose 5% to $16.5 million. Management was clear about how the coronavirus pandemic was pushing more business online and lifting its results. "We are in a position to provide valuable services to mailers and shippers coping with this worldwide health crisis," CEO Ken McBride said in a press release.

Now what

Despite the COVID-19 demand boost, McBride and his team simply affirmed their full-year outlook that calls for sales to land between $570 million and $600 million, translating into just a modest increase over 2019's results. Yet that forecast was better than most investors had expected, and that surprise helped lift the stock last month. Stamps.com's long-term returns will depend on management's success in sustaining the growth momentum achieved over the last few months.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends Stamps.com. The Motley Fool has a disclosure policy.

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