When Stamps. com /quotes/zigman/92950/quotes/nls/stmp STMP +3. 68 % announced net incomes on Oct. 25. the company didn’t merely present a great public presentation. It delivered a reproof to a batch of people who think the company is a left-over dot-com dinosaur. Some of these disparagers are short-sellers who have sold short about 6 % of Stamps. com’s outstanding portions. But like another of our retentions in the Crabtree Technology portfolio on Covestor. Shutterfly /quotes/zigman/101900/quotes/nls/sfly SFLY -0. 21 % . Stamps. com has used this misperception to its advantage. It has carved out a dominant niche in a immense and profitable section: electronic postage. The majority ( 93 % ) of Stamps. com’s concern is its core Internet-based Personal computer Postage offering. This enables concerns both big and little to publish U. S. Postal Service-approved postage with merely a Personal computer. pressman and Internet connexion. Although similar services are offered by both the USPS itself. every bit good as rivals like Pitney Bowes /quotes/zigman/238474/quotes/nls/pbi PBI -0. 29 % . Stamps. com clients seem willing to pay about $ 21 per month for a better user experience.
This might include. for illustration. its alone ability to natively incorporate with Microsoft Word in order to utilize that program’s automated mail merge and envelope printing functionality. We’ll discuss Stamps. com’s specific quarterly public presentation in a minute. but right now. let’s topographic point the company in some context. First. comparison Stamps. com’s third-quarter year-over-year quarterly gross growing of 16 % with that of its archrival. Pitney Bowes. which reported its ain 3rd one-fourth on Nov. 1. Pitney’s gross of $ 1. 22 billion represented a diminution of 6 % from its year-earlier one-fourth. Looking “under the covers” at Pitney doesn’t addition one’s assurance. either: Equipment gross revenues ( largely its traditional postage metres ) declined 4 % year-over-year and its more modern package offerings declined 17 % . OK. so it looks to me that Stamps. com is taking portion from Pitney Bowes. But what sort of portion is at that place to take? See that harmonizing to the United States Postal Service’s ain 2011 Annual Report. $ 43 billion of the entire $ 66 billion in USPS postage is represented by types of mail that Stamps. com can manage.
That includes non lone traditional excellent mail. but besides priority mail. media mail and parcel-post majority transportation. Harmonizing to Stamps. com’s ain figures. we estimate that its clients will utilize their PC-postage services to publish $ 1. 1 billion in postage in 2012. So this represents approximately 2. 6 % market portion. There’s plentifulness of room to turn and portion to take. So what were the high spots from Stamps. com’s 3rd one-fourth. and why do we believe the company is positioned to maintain turning productively? Growth: Core PC-postage gross growing of 20 % in Q3 surely compares good non merely with Pitney Bowes’ gross diminution. but besides with a 2 % GDP growing overall. ARPU: Average gross per Stamps. com user rose once more to $ 21. 62 in Q3. go oning its steady acclivity. See that six old ages ago. prior to the fiscal crisis. ARPU was $ 17. 18.
Net incomes Power: Fully diluted portions outstanding has dropped from 24. 4 million at the terminal of the first one-fourth in 2006 to merely 16. 7 million in the 3rd one-fourth of 2012. During Q3. Stamps. com bought another 961. 000 portions back. and on Oct. 17. authorized the redemption of another one million portions. Outlook: Can the good intelligence continue for Stamps. com? Management surely thinks so. When they announced Q3 net incomes. direction raised its counsel for the balance of 2012. They expect full-year non-GAAP net incomes per portion to be in a scope of $ 1. 55 to $ 1. 75 ; this compares favourably to management’s ain anterior counsel of $ 1. 35 to $ 1. 55 and was above the then-consensus of $ 1. 50 per portion ( harmonizing to I/B/E/S Estimates ) . So what are the hazards to Stamps. com’s continued tally of first-class public presentation? Entire Mail Volumes: As noted earlier. there’s plentifulness of market portion for Stamps. com to take productively. but entire U. S. domestic mail volumes continue a slow diminution.
Entire USPS gross was $ 70 billion in 2005 and declined to $ 66 billion in 2011. and that occurred despite lifting postage monetary values. So the tendency is non in the right way. Despite Stamps. com’s recent corporate success. it seems likely to go on confronting uncertainties about its concern theoretical account in a universe full of electronic mail. But as you weigh whether or non Stamps. com is a good investing. see that until person invents teleportation of physical goods. no 1 will be e-mailing grandma a box of cookies any clip shortly. Or a pump for her afloat cellar. Or an iPod on which she can read. yes. your electronic mails. This commentary does non represent individualised investing advice. The sentiments offered herein are non individualized recommendations to purchase. sell or keep securities. Disclosure: Mr. Randall is long STMP and SFLY
1 ) Stamps. com is a good illustration of utilizing ICT to cut down the menace of replacement merchandises or service. Explain how. 2 ) How do you believe Stamps. com achieved the first mover advantage?