A simple search through the postal regulatory commission database shows the USPS has approved and extended its NSA with Stamps.com. The timeline begins on June 8th with a notice by the USPS to review the existing contract that if not renewed would have expired at the end of July (27th - would have expired in June without a prior extension). Capitol Forum started the short rally with their "article" June 11th that Stamps.com could lose their reseller contract. While technically true, they stretched the truth to make that statement by a large degree. The contract was never in serious jeopardy of being lost, and has simply been amended and extended, which will continue to allow STMPs to operate their wide moat, highly capital efficient, cash flow machine moving forward without any disruption to their ongoing operations. As noted by sell side analysts the short attack released on SA was well timed as the company is in a quiet period ahead of upcoming earnings. I would expect you will hear a reiteration of my research by management on that call that the USPS contract has been secured and the amendment provides no material changes to their ongoing business.
Timeline of the PRC filings relating to the NSA:
- July 8th --www.prc.gov/docs/96/96580/Notice.PM-FCPS...
- July 8th --www.prc.gov/docs/96/96591/Order%20No.%20...
- July 17th (Approved Amendment) -www.prc.gov/docs/96/96686/Order_3436.pdf
- We expect STMP to see an outsized bullish move in light of these facts destroying the bear thesis that sank the price from roughly $90/share to current levels.
- The earnings beat and raise last quarter was masked by a major short push
- We expect STMP to rally if earnings are in line with updated guidance, back towards the $105 range the stock approached in AH post Q1 results
- Recommendation is long into earnings through equity or through selling puts to finance upside calls
Disclosure: I am/we are long STMP.