Stamps.com Shares Plummet After Breaking Off With USPS and Betting on Amazon

Published on: 22 Feb, 2019

Stamps.com Inc. (NASDAQ: STMP) shares plummeted by 57.2% on Friday after the Company revealed on Thursday that it would break off its partnership with the United States Postal Service.

Stamps noted that it exclusively broke off its deal with USPS and is now betting on Amazon (NASDAQ: AMZN) becoming the next shipping space, according to CNBC. Stamps’ bet on Amazon received major backlash from investors and shareholders, which caused the stock price to crater by USD 114 on Friday.

"Amazon's track record of disrupting an industry is well-established. So their threat should be taken very seriously by every player in the shipping industry," Chief Executive Officer Ken McBride said on the Company's earnings call Thursday. "We are setting our corporate strategy assuming Amazon will be a big global player in shipping."

"Amazon is the powerhouse, the gorilla in e-commerce. And so we need to work with Amazon and really everybody needs to work with Amazon," McBride said. "What they've done is they've built their network from scratch, and they've built it in the last few years, and they've built it with e-commerce in mind. And a lot of the other carriers have networks that are much older." concluded McBride.

McBride sees Amazon operating more efficiently as opposed to USPS because Amazon’s centered around e-commerce and speedy deliveries. Amazon set a standard of shipping times which many other corporations struggled to compete against. McBride believes that USPS is one of those companies that can’t live up to expectations.

McBride continued to note that USPS has significant financial losses, including its USD 1.5 Billion in the previous quarter. He also says USPS is burdened by 2006 Postal Accountability and Enhancement Act, which requires pre-fund retiree health benefits of more than USD 5.5 Billion each year. USPS has also be able to support 600,000 postal retirees that receive health and pension benefits.

The burden’s USPS faces will not allow the postal service to compete against major e-commerce companies. E-commerce companies can easily enter new products into their marketplace and ship out much faster.

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Bryan Shin

Email: Bryan@financialinsiders.com

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