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October 22, 2019 9:45 AM, EDT

Stamps.com Soars as UPS Deal Seen as ‘Step in the Right Direction’

UPS truck and driver UPS Inc.

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Stamps.com Inc. shares rallied Oct. 22 ahead of the opening bell after UPS Inc. announced a pact to offer discounted shipping rates to the company’s customer base of more than 740,000.

“We long mentioned a new partnership was needed to help lift shares and believe the UPS collaboration is a step in the right direction,” wrote Darren Aftahi, an analyst at Roth Capital Partners.

Stamps.com chart

Rates are expected to be as much as 55% below daily rates, including surcharge waivers, he said. The deal should aid Stamps.com volume and margins and add upside to fourth quarter and fiscal 2020 forecasts, Aftahi said, even as the rates are still unlikely to be below legacy United States Postal Service rates.

The UPS collaboration marks the first partner Stamps.com has signed since ending its relationship with USPS in February — a move that sent the stock tumbling 58%. Less than three months later, Stamps.com cut its year forecasts, sinking the shares another 56%.

Shares of Stamps.com rose as much as 31% pre-market to $99.99, which would be the highest intraday level since late February. Before Oct. 22, shares have dropped 51% this year.

The pact could be the catalyst necessary to reverse the trend in shares year to date, Aftahi said. He boosted his price target to $85 from $52. His rating remains neutral.

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