STMP has always been a company that defied logic. And even after watching them for about a year, I am a little trepidatious about their ability to maintain their 40%+ net margin. But one thing they haven’t been is unpredictable. Despite the wild share price fluctuation, the company has been pumping out great results, beating expectations (even their own) and generally doing phenomenally.
Speaking of beating their own expectations, the midpoint of the revenue guidance they gave 1 year ago was 300M. Well they just clocked in at 364M for 2016. Ha! Now they’re saying 400 - 425M for 2017. Pardon my snicker, but I just don’t buy it. I feel like they know they’ll crush that, but they’re just saying what the market was already expecting.
So why is the market not expecting more? I don’t know. With this company, it just seems like the market is always waiting for an “other shoe” that never seems to drop. Instead they just keep killing it.
Compare that anemic 13% revenue growth guidance to these results:
Dec quarter:
Revenue was up 52% YoY
EPS was up 74% YoY
2016:
Revenue was up 70%
EPS was up 96%
I bought a couple days before earnings because I was convinced a huge beat was coming. If I had waited until after hours the day they reported earnings (which were even better than I’d hoped), I could have snagged some at between $110 and $115. The reaction was really nuts! After a huge beat! The market giveth. I think this was because they are not a widely-followed company? Sometimes AH especially can be crazy with lower-liquidity (less volume traded) companies. Anyway, it settled down and they were basically even today. I’m failing to understand why STMP shares weren’t up about 15% today! Non-GAAP PE is sitting at 15.1 if you calculate the old way, or 23.9 if you calculate the new way.
I’ve only got a ~3% position and I’ll probably leave it alone unless the AH market decides to have a cow again and offer me shares for a 20% discount.
Best to all,
Bear
PS They actually give all kinds of guidance, including non-GAAP EPS. They had to make a non-GAAP change (to regular cash payer, whatever that means…I think I’ve heard something similar from other companies? Whatever.), in which non-GAAP would have been $5.50 for 2016 (instead of $8.70) under the new system. They’re guiding for $6.00 - $7.00 in 2017, but (according to Yahoo Finance) Wall Street rather inexplicably expects it to decrease from (old system numbers) $8.70 to $8.38. Probably Yahoo has just got the math wrong?
I have an absurd proportion of my portfolio in STMP and so I’ve been pretty interested in following their progress. I’ve only owned it since last August, but I’ve noticed the same thing…… management has been sandbagging on results.
Will that happen again THIS year? I’m not sure. Do you have a history of management forecasts versus results over the last couple years to see if they always sandbag?
They’re guiding for $6.00 - $7.00 in 2017, but (according to Yahoo Finance) Wall Street rather inexplicably expects it to decrease from (old system numbers) $8.70 to $8.38. Probably Yahoo has just got the math wrong? – Bear
From the earnings release:
For 2017, the Company currently expects GAAP net income per fully diluted share to be in a range of approximately $4.20 to $5.10. The expected GAAP net income per fully diluted share range includes non-cash stock-based compensation expense of approximately $40.5 million, non-cash amortization of acquired intangibles expense of approximately $16.0 million and non-cash amortization of debt issuance costs of approximately $0.4 million. Excluding the stock-based compensation expense, amortization of acquired intangibles expense and amortization of debt issuance costs and including higher expected non-GAAP income taxes of approximately $23 million from the expected tax effects of these adjustments at an assumed 40% effective tax rate, non-GAAP adjusted income per fully diluted share is expected to be in a range of $6.00 to $7.00.
Will that happen again THIS year? I’m not sure. Do you have a history of management forecasts versus results over the last couple years to see if they always sandbag?
Well I did say this in my post: the midpoint of the revenue guidance they gave 1 year ago was 300M. Well they just clocked in at 364M for 2016. Ha!
I mean, 300M was a 40% guide. They instead grew 70%. I don’t know if you can call that sandbagging or just prudent. Like I also said in the post: they’re just saying what the market was already expecting. And honestly, why would they do otherwise? They could give aggressive guidance, but if they just kind of go with the status quo, it will be an easy beat. I don’t really understand a 13% guide for the coming year, but even that is higher than the anemic expectations the market had for them a few months ago (if memory serves). I also don’t think revenue will be up 70% again or anything. Is 35-40% possible? I really don’t know. I think absolutely it will be 25%+, simply based on the sequential increases the last few quarters. Not to mention how fast EPS is growing.
About what percentage is “an absurd proportion of [your] portfolio?” I would urge some caution with this one, although obviously I like its potential enough to own it. It’s just so volatile, as I said, and I also just don’t really trust them yet. The website is a bit clunky, and there was some problem and the press release didn’t seem to be ready on time. Then the CC started 15 minutes late or something. The CEO seemed angry or just unpleasant. Both he and the CFO were about as interesting as drying paint. This of course could all mean nothing, but I will withhold judgement or exuberance until I get more familiar with the company. My position is 3% for now, so it has plenty of room to grow over time.
Hi Bear and Everyone, I just put in the numbers for STMP into Neils great 1YPEG sheet. It looks pretty good there. I bought it last June and it’s up 40% for me so thats good on my scale.
Just wanted to provide some numbers so others can look it over.
I don’t know if you can call that sandbagging or just prudent. Like I also said in the post: they’re just saying what the market was already expecting. And honestly, why would they do otherwise? They could give aggressive guidance, but if they just kind of go with the status quo, it will be an easy beat. I don’t really understand a 13% guide for the coming year, but even that is higher than the anemic expectations the market had for them a few months ago (if memory serves).
About what percentage is “an absurd proportion of [your] portfolio?” I would urge some caution with this one, although obviously I like its potential enough to own it. It’s just so volatile, as I said, and I also just don’t really trust them yet. – Bear
Prudence. Sand bagging. Could be either or some degree of both. I haven’t followed them enough to know, actually. Certainly better than missing one’s own guidance. And truth be told, I’d rather see no guidance. I don’t believe management owes financial guidance to anyone, although I appreciate guidance on overall upcoming operations and long term vision.
As to percentages, a smidge under 32% (not a typo). Lest you think this is a typical novice error, I’ve been investing over 50 years. So, it isn’t inexperience…… just my usual level of insanity that helped me retire early. I wouldn’t suggest to anybody on this board that my allocation is a good idea…… this is a YMMV situation and would be a likely recipe for disaster for some. Anyway, I’m thinking I’ll dial STMP back to around 10% or so soon and build up some combination of these:
FB (already own some shares)
NTES (already own some calls)
PAYC
PYPL
SHOP
…and more cash for selling puts, buying calls and buying other opportunities.
Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.
As to percentages, a smidge under 32% (not a typo).
[Picks jaw up off ground…]
Yeah, I think that your plans to reallocate a bit are prudent. But congrats on the returns with STMP thus far. FB, PAYC, and I would also suggest YELP, are some of the best buys I’m seeing right now. And it’s difficult to argue against SHOP for the long haul.
I sincerely hope you weren’t paying attention to the AH action on the day they reported earnings. Because that would freak me the **** out.
Good luck to you Rob, and all of you reading this,
Bear
PS And considering my SHOP position was recently ~26%, who am I to talk?
I sincerely hope you weren’t paying attention to the AH action on the day they reported earnings. Because that would freak me the **** out. – Bear
Nah, I watched it.
The low point would have been quite a few $$ lost, but it basically just moved the price back a couple/few weeks. Not that big a deal.
Once though, I lost 1/3 of my portfolio in a few minutes after an unexpected unfavorable FDA ruling, not all that long before I retired. Quite a surprise! I widened my eyes a bit but figured I’d make it back soon enough. It turned out to be a good year and I was back in a matter of months. So…… I usually don’t have strong reactions to big stock moves.
And thanks for your kind words. I will look at YELP again. Things change and I often miss great deals because I spread myself pretty thin on the boards. (Plus, I spend a good deal of time watching the little grandsons…. a couple times a week).
And with your recent SHOP position, that would have made me uncomfortable. Great story, great gains in revenues and cash flow…. but there are limits as to how much I’d want to bet on it at this time. I think I need to internalize the whole story (and progress) a bit first before my confidence is high enough.
I must be a wuss.
Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.
I suppose it is a direct function of a long bull market but I am constantly astonished on this board by the percentages of their portfolios (book cost, not compounded sum) that people are prepared to commit to a single company, especially when that company is in the field of technology. Sometimes I discern that near or complete novice investors are being encouraged to behave thus.
The remainder know all about the danger of avalanche on this particular face, are carrying all the kit and are listening out on the traverse for the almost imperceptible click of separation and disaster - which may help them, or may not. Try to clear a bit around the face and spit to find which way up you are, if you are still conscious.
I suppose it is a direct function of a long bull market but I am constantly astonished on this board by the percentages of their portfolios
I think it is more a function of one’s own personal tolerance for risk and volatility. I spend a lot of time figuring out which stocks I want to buy and want to reap the gains (or losses) of that effort. I’ve noticed there is a large number of people on this board that also have HUNDREDS of stocks. I personally would get quite upset when that stock jumps up 20-30% if my overall portfolio got less than a 1% increase. Yes, you can say but when it drops you are protected. Different people have different goals and methods to get there I guess. For instance, some here NEVER sell. I wouldn’t want a large amount of a very volatile stock either if I knew it would have to go bankrupt before I was going to sell it. I’m sure those of us who have the whole portfolio in less than 15 stocks are also much more likely to sell very quickly when things don’t go as expected.
It makes no sense at all, to my small mind, why someone would spend so much time trying to pick a stock if it was only 1 of over 50 stocks. You might as well just go with an index fund at that point and pick up a new hobby. It just shows that investing is very personal and one should go with what they are comfortable with.
I think it is more a function of one’s own personal tolerance for risk and volatility.
Diversification is important for safety. The real question is how many stocks, diversified by sector, you need to be adequately diversified. Is it ten or is it fifty or is it somewhere in between? Risk tolerance is not the only issue, how many you can successfully track is just as important and that depends partly on your attention span as well as on the quality of your record keeping.
Peter Lynch at Magellan had lots of stocks but he also commanded a small army of analysts to help him. Not only that, he basically had two types of stocks, a small lot of core holdings and a “long tail” of would be ten baggers. I would not call that excessive diversification but a growth strategy.
I don’t know the statistical answer to my question “how many stocks is adequate diversification” but the literature suggests somewhere between ten and twenty if properly diversified by sector. Ten high tech stocks is not diversification. My personal target is a dozen stocks.
You can’t really keep track of more than 25 or so stocks, and that’s an absolute outer limit. I greatly prefer a smaller number of stocks, as they are easier to keep track of.
Saul, Knowledgebase Part 1
If you can identify six wonderful businesses, that is all the diversification you need. And you will make a lot of money. And I can guarantee that going into a seventh one instead of putting more money into your first one is gotta be a terrible mistake. Very few people have gotten rich on their seventh best idea. But a lot of people have gotten rich with their best idea. So I would say for anyone working with normal capital who really knows the businesses they have gone into, six is plenty, and I probably have half of what I like best. I don‘t diversify personally.
Warren Buffett
Honestly, I think you have to go with what works best for you. I currently own 19 stocks and I try to follow all fairly closely, though some require closer attention than others. I wouldn’t want to own too many more because I don’t think I could follow them as well. But others have had much success owning fifty or more stocks. So I say go with whatever works best for you! But I don’t think you have to have 50 stocks to be diversified.
It makes no sense at all, to my small mind, why someone would spend so much time trying to pick a stock if it was only 1 of over 50 stocks. You might as well just go with an index fund at that point and pick up a new hobby. It just shows that investing is very personal and one should go with what they are comfortable with.
You said this better than I could have and I think provided an interesting topic. Love the poll too. I’d also like to know about concentration, so I think I’ll start a quick poll of my own.
Many people buy their biggest investment, their home which could be a multiple of their entire assets, borrow 80% to 90% against it, and obligate themselves to pay it off over a major portion of their lives without being concerned if the RE market will be up or down when they will be ready to sell. And then many of these people believe 5 or 10 fully paid stocks (even those paying growing income) are risky because they aren’t diversified
I do not know how many holdings I have. I would not dream of counting them. If I found a good looking one, I’d buy it. The idea of not buying it because I already had some kind of quota strikes me as very strange.
Nice take. Much appreciated. This is also one of my big winners too, but only about 1% of portfolio. I’m just happy that I’ve been more than compensated for the $16/month my wife has consistently paid for Stamps (several years now!)through their service. In her defense, if she hadn’t been doing that, I probably never would have bought the shares, once they got recommended.
Bringing discussion back to STMP, few years back I studied it, had a small position and sold it with some gain.
The reason I sold it and didn’t follow up further was the perception I had that the headroom for this company was not high. It seems like the only company in this business, depends on more small businesses using USPS as primary way of sending their products to customers. So most everyone who should be STMP customer, already were their customers. Their revenue in 2007 through 2011 did prove that.
Clearly, I mis-judged their growth potential or something else changed. I’d like to learn that. However, At this point, what potential do you see in this company? Do you see its revenue can grow >2x from here?
However, At this point, what potential do you see in this company? Do you see its revenue can grow >2x from here?
Absolutely. They’re growing to new customers and growing the spend from current customers. Demand is increasing as things are increasingly bought online. I read this somewhere on Fool.com and I can’t say it any better than the author did:
Over the past three years, Stamps has morphed from a company focused on serving small and home businesses to one that provides shipping solutions to much larger e-commerce customers. This has increased the amount of revenue Stamps collects from each customer and simultaneously made its services stickier – a powerful one-two punch. This business-model shift has dramatically improved Stamps’ earnings power, and there’s plenty more opportunity for growth. Sales to e-commerce shippers now comprise more than 70% of Stamps’ total revenue, and this segment is growing much faster than its mature core business.
