Stamps.com (NASDAQ:STMP), a leader in shipping services, blasted up 64% in Friday's trading on over 12 times normal volume after it revealed a buyout deal in the making. Under the terms of the deal, Stamps.com will be purchased in an all-cash deal by private equity firm Thoma Bravo. Despite the new ceiling on the share price, however, analysts are urging caution and the stock was seen retreating from its Friday close in trading today.
Thoma Bravo Sends Stamps.com Soaring
Under the terms of the deal struck, Thoma Bravo will buy Stamps.com stock for $330 per share, giving the company a total value of about $6.6 billion. That represented a 67% premium over the Thursday closing price, and currently represents about an $8 premium over trading today. The deal is set to close sometime in the current third quarter, though the offer will be subject to both shareholder and regulator approval. Additionally, the Stamps.com board of directors has a 40-day period to look for a better offer, which it may or may not find in the interim.
Stamps.com, as a provider of shipping solutions, has landed great benefit in the past from the explosive growth of e-commerce. Stamps.com's move to work with Thoma Bravo—based on word from Ken McBride, Stamps.com's CEO—will offer the company both “financial and operational support”, giving Stamps.com the room it needs to pursue new growth and innovation. At last report, Stamps.com had around 732,000 monthly subscribers and was previously seen partnering with Microsoft, among others.
New growth and innovation likely would have been helpful for Stamps.com as a private company, especially after the 2019 move that saw Stamps.com cut off at the post office. The exclusive parcel reseller relationship between Stamps.com and the US Postal Service ended that year as USPS wouldn't allow Stamps.com to add other parcel carriers to its platform. At the time, this was a blow to Stamps.com, but it was also considered to be a long-term boost to the company as Stamps.com would be able to open up its services to a range of new users. This turned out to be the case as, around two years later, the company is being bought out at a substantial premium and is about to be taken private.
Thoma Bravo has been increasing its pace of such deals of late; earlier this year, it announced plans to take Proofpoint, a security software seller, and Talend, a data solutions provider, similarly private. Thoma Bravo manages over $78 billion in assets total
How Do Financial Analysts Feel About STMP Stock?
With a new ceiling established for STMP stock—who would buy in at more than $330 per share now?—it would be safe to think some buying recommendations might come out as there's still profit to be made. Of course, given the current Stamps.com share price, that's a slim profit any more, and likely contributes to why financial analysts are still advising caution on buying any more. The consensus rating for Stamps.com stock is “hold”, and that's been the case for the last two years.
A year ago, the company had two “buy” ratings and four “hold” ratings to its credit. Six months ago, that shifted to two “buy” and two “hold.” Now, we stand at three “hold” ratings, a point likely reflective of the fact that STMP stock is trading near the Thoma Bravo-established ceiling.
The average price target, meanwhile, has shifted accordingly, with a current high, low, and average of $300 per share.
Recent activity has largely reflected the Thoma Bravo deal, and seems to expect that the deal will go through as stated. Both Craig Hallum and Maxim Group lowered their forecasts on the company, going from “buy” to “hold” on the same day. Until that, however, there had been very little movement on Stamps.com; the last rating change before those two came from Northland Securities in August 2020, which saw the company downgraded from “outperform” to “market perform.”
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