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Why Pitney Bowes Stock Is Soaring Today

By Lou Whiteman - Jul 9, 2021 at 1:09PM

Key Points

  •, a Pitney Bowes rival, is being acquired at a significant premium, causing investors to take a fresh look at Pitney's valuation.
  • Pitney Bowes is in a very different part of its life cycle, and investors should be cautious about the comparison.

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A private equity firm is paying up for one of its rivals.

What happened

Shares of Pitney Bowes (PBI 1.77%) climbed as much as 20% on Friday in an apparent reaction to a private equity buyout of one of the company's rivals, (STMP). That company is being acquired at a substantial premium, leading investors to reconsider Pitney Bowes' valuation.

So what

Pitney Bowes is a 100-year-old shipping company, best known for its classic postage meters. But in recent years it has shifted to digital shipping services, including customer information management and mailings for e-commerce. It made that shift, in part, due to the disruption in the business by

A person preparing packages to ship.

Image source: Getty Images. got a big boost on Friday when private equity firm Thoma Bravo agreed to acquire it for $330 per share in cash, a premium of 67% to the company's Thursday close. In total, the deal values at about $6.6 billion, or more than eight times the company's $795.7 million in revenue over the past 12 months.

Pitney Bowes, by comparison, trades at less than one time revenue.

The two companies don't make for a perfect apples-to-apples comparison, but they are close enough to cause Pitney Bowes shares to jump on Friday.

Now what

Pitney Bowes has been a tough stock to love in recent years. Even after Friday's jump, it's down 48% over the past five years, losing to the S&P 500 by about 150 percentage points.

This remains a company trying to cope with a digital revolution that has fundamentally altered its business model. Pitney Bowes has made some strides in its transformation, and this is hardly the first time the company's shares have had an extreme reaction to potential upside, but it's still a long way from being considered a growth stock. Investors shouldn't expect a Thoma Bravo-type offer anytime soon.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends The Motley Fool has a disclosure policy.

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Stocks Mentioned

Pitney Bowes Inc. Stock Quote
Pitney Bowes Inc.
$3.45 (1.77%) $0.06 Inc. Stock Quote Inc.

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