Please ensure Javascript is enabled for purposes of website accessibility

Why Pitney Bowes Stock Is Soaring Today

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

Key Points

  • Stamps.com, 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.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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, Stamps.com (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 Stamps.com.

A person preparing packages to ship.

Image source: Getty Images.

Stamps.com 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 Stamps.com 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 Stamps.com. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Pitney Bowes Inc. Stock Quote
Pitney Bowes Inc.
PBI
$3.45 (1.77%) $0.06
Stamps.com Inc. Stock Quote
Stamps.com Inc.
STMP

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
389%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/13/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.