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Stamps.com
is scheduled to report third quarter 2008 results after the
market closes on Thursday, October 23. Based on our analysis, we
at
eChristianInvesting are expecting STMP to report
disappointing results that miss Wall Street’s consensus
expectations.
Analyst
Expectations
We are
forecasting revenues of $20.5 million and EPS of $.13. This
would represent a 1% increase in revenues from last year’s $20.3
million in the same period. The current analyst consensus calls
for revenues of $21.1 million and $.14 EPS. On July 23, the
company gave full year guidance for revenue of $80 - 90 million
and EPS of $0.55 – 0.65.
Management
indicated that they were beginning to see some weakness in their
business due to macroeconomic conditions on their 2nd
quarter earnings call. Based upon the economic developments of 3rd
quarter, we believe that this weakness will be magnified in the
upcoming quarterly results. In addition, our checks show a
summer slowdown in traffic during July and August which could
also weigh on the top line numbers.
Share
Performance
To date,
Stamps.com shares are down only 12%. They have consistently been
one of the better performing stocks this year, having easily
outperformed the S&P 500’s dismal 35% loss (YTD).
Valuation
Shares are
now trading at a reasonable 16x consensus 2009 EPS estimates.
This is below the relative valuations of their peer group. While
STMP’s reasonable valuation (along with over $4 per share in
cash) makes it appear attractive, we believe that the potential
for disappointing quarterly results along with the expected
reduction in full year guidance makes it risky to buy this stock
right now.
Recommendation:
Hold with a $9-10 price target.
At the time this article was published, the author did not have
a financial position in any of the stocks mentioned in this
article.
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