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Why Stamps.com Stock Jumped Today

By Evan Niu, CFA – Updated Jun 26, 2020 at 1:36PM

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Demand for shipping packages is surging during the COVID-19 pandemic.

What happened

Shares of Stamps.com (STMP) have jumped today, and were up by 7% as of 12:40 p.m. EDT on Friday, following a recent report that the U.S. Postal Service (USPS) was seeing a surge in shipping demand amid the coronavirus pandemic. Stamps.com had ended its exclusive partnership with the Postal Service last year in order to partner with other shipping carriers but remains a licensed USPS vendor.    

So what

The COVID-19 pandemic has created a broad surge in e-commerce demand as consumers shop from the safety of their homes, which is driving a spike in package volumes being shipped through the Postal Service, according to The Washington Post.

Packages at a front door

Image source: Getty Images.

The report cites financial data that the Postal Service recently shared with Congress: Throughout April, May, and early June, package volumes surged between 20% and 80%.

Now what

Booming demand for shipping bodes well for Stamps.com. While there are concerns about the financial sustainability of the Postal Service, Stamps.com now works with UPS as its other primary shipping carrier as part of its diversification strategy, while integrating with numerous e-commerce tech platforms.

The company's customized USPS postage program was recently eliminated, and Stamps.com is in talks with the government agency to reverse or modify that decision. The expected impacts of that decision are incorporated into Stamps.com's guidance for the year, which calls for total revenue of $570 million to $600 million in 2020.

"We have customers who have been strong beneficiaries of increased e-commerce consumption, driven by COVID-19 and as well as customers who have unfortunately had to suspend operations," CEO Ken McBride said on the last earnings call. "We've also seen strong recent growth in domestic shipping trends as more consumers adopted the work-from-home model and as e-commerce activity picked up with consumers shopping more online."

Evan Niu, CFA 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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Stocks Mentioned

Stamps.com Inc. Stock Quote
Stamps.com Inc.
STMP
United Parcel Service, Inc. Stock Quote
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